“Even if a production freeze of some sort had been agreed we would have been very surprised if it had meant the price of oil going back above $60 a barrel”.
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All of the 18 producing countries, except perhaps Saudi Arabia (and of course Iran) are producing and selling all that they can.
“It’s been my belief for some time that Iran wouldn’t agree to any limits on their production until they’re back up to four million barrels a day…In the meantime, I don’t see Saudi Arabia cutting their production while Iran keeps building theirs”, Ross said. “If not, the oversupply will linger longer and prices will stay depressed”, said Nelson Wang, an energy analyst at CLSA who forecasts US oil prices to drop as low as $30 a barrel. The breakdown of talks will nearly certainly lead to another rout in oil prices over the next few weeks – but the pain could be short-lived.
“With no deal today, markets’ confidence in OPEC’s ability to achieve any sensible supply balancing act is likely to diminish and this is surely bearish for the oil markets where prices had rallied partly on expectations of a deal”, said Natixis oil analyst Abhishek Deshpande.
A Calgary energy economist says the failure of weekend OPEC meeting has accomplished the goals set out by Saudi Arabia almost two years ago.
The door is still open for cooperation between oil producers and an accord will be discussed at the next meeting of the Organization of Petroleum Exporting Countries in June, said Saudi Oil Ministry adviser Ibrahim Al-Muhanna. This would be despite OPEC members continuing to produce lots of oil.
They won’t – and the market knows this, as oil prices are rising, not falling.
“If Iran freezes its oil production … it can not benefit from the lifting of sanctions”.
Rather, supply from other producers has gradually fallen, such as Canadian oil sands and US shale.
Kuwait Oil Company (KOC) was forced to cut output to as little as 1.1 million barrels per day (bpd), down from a normal level of about 3 million bpd.
Oil was supported by the news of a Kuwaiti workers’ strike that brought down the country’s oil output by half.
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Morgan Stanley said the failure sparked “a growing risk of higher OPEC supply”, especially as Saudi Arabia threatened it could hike output following the failed deal.
