Over the weekend, the Organization of Petroleum Exporting Countries (OPEC) chose to get the band back together for one more price-fixing scheme, 15 years after the group’s last significant effort to coordinate output.
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With the apparent failure of the meeting to forge a consensus to freeze oil production at January levels, as Saudi Arabia and Iran “torpedo-ed” the discussion even before the meeting, oil futures slumped over 5% in retaliation.
A deal to freeze oil output by OPEC and non-OPEC producers fell apart in the Qatari capital of Doha on Sunday after Saudi Arabia demanded that Iran join in the freeze.
WTI and Brent prices are set to plunge on Monday, reflecting the failure of OPEC to reach a deal, as oil traders had largely baked in the production freeze deal into the price for crude.
The cost of oil has fallen in the past two years from above $100 a barrel to touch 12-year lows this year, before picking up in recent weeks.
Ultimately, Saudi Arabia has chosen the price of oil, and it likes the current levels.
Oil prices steadied on Monday after a Kuwaiti workers’ strike that slashed more than half the country’s oil output offset worries about a scuttled major producers’ freeze plan that sent the market tumbling earlier.
“An agreement on production caps, which had still seemed possible the day before, collapsed because of Saudi Arabia, which demanded that all oil producers – that is to say including Iran – should be included”, Commerzbank analysts said in a client note. Any misunderstanding between the participating countries concerning the mechanism of freezing oil production can be removed, Dr Al Sada said.
“Oman has a good relationship, by the way, with everyone, not just Saudis and Iran, and we are prepared to see what is good for all of us”, he said.
The talks in Doha between Opec and non-Opec oil producers yesterday tried to address several concerns related to global oil market.
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“There will be increasing production by Iran as planned, Libya might return, Iraq might also increase, but otherwise most of these countries already produce what they can”. Iran pumped 3.2 million barrels of crude a day in March, according to data compiled by Bloomberg, and wants to reach 4 million barrels a day by the end of the Iranian year in March.
