Brent crude futures fell nearly seven per cent in early trading yesterday before recovering to $40.97 per barrel, still down 2.15 per cent since their last settlement. Back in 1986, Saudi was focused on the threat of the Soviet Union’s booming, higher-cost production, and boosted output by 1.6 million barrels a day to flood the market and leave itself as the strongest player standing.
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That calls into question what long-term gain producers can expect from a promised freeze, and indeed how much power OPEC now wields as American shale firms stand poised to re-enter the market if prices rise.
However, analysts suggest the benefit from lower crude oil may tapper off as budget constrains in oil-dependent economies in the Gulf region will affect remittances from its diaspora.
One RMT union chief feared that the impasse would lead to further cuts in the North Sea.
“Discord in Doha has left oil prices weaker and has prompted a drop across European equity markets”, said CMC Markets analyst Jasper Lawler. By 0730 GMT it was up 0.6 percent at 109.16 yen per dollar. If oil falls too much, Saudi Arabia won’t have enough cash.
United Kingdom shares retreated on Monday, with energy stocks pacing declines after a deal to freeze oil output by OPEC and non-OPEC producers fell apart amid a spike in tensions between Saudi Arabia and Iran.
The some 18 oil exporting nations, including non-OPEC Russia, had gathered in the Qatari capital of Doha for what was expected to be the rubber-stamping of a deal to stabilize output at January levels until October 2016.
But Iran is continuing to increase output following the lifting of sanctions against it.
Mr Novak said Russian Federation was not shutting the door on a deal but the government would not restrain output for now. “As such, the recent rally in oil prices could appear premature and we would not be surprised if the market registered some disappointment come Monday morning”. Share prices sank in early trading Monday after an effort by major oil producing nations to agree on production cuts failed over t… The US was the fifth-largest recipient of Kuwaiti crude, with crude oil loadings averaging over 200,000 bpd. That makes the Saudi position all the more puzzling.
Looking at oil prices today, with the West Texas Intermediate showing 1.5% down at $39.74 and with those prices unable to break convincingly above $40 in six months, certainly things look as downbeat as ever. Together, they supply more than half of the world’s oil.However, informal meetings were said to have taken place over a revised draft agreement, but a report by Reuters, who said it had seen the new wording, spoke of it being a “soft freeze” that would limit production to “an agreeable level” rather than the current level.
“While there are a number of factors that might curb oil supply in the short-term – including a strike in Kuwait and the quake in Ecuador – OPEC’s main problem is the relationship between Saudi Arabia and Iran and this problem is not going to go away”, O’Keeffe told AFP.
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Russ Mould, investment director at AJ Bell, said: “In theory, falling oil prices means cheaper petrol, which should put more cash in consumers’ pockets, cash which could be spent at the food and general retailers”.
