It should be noted that the International Energy Agency reported last week that the oversupplied oil market will find its balance in 2H16.
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Lower oil prices in the short‐term will encourage lower production in many countries including the United States, according to the analysts of the Energy Security Analysis (ESAI), which is the leading US-based independent research firm.
The OPEC countries and Russian Federation had met in Qatar this weekend to finalize a deal capping worldwide oil supplies at January levels through the fall.
Oil prices have tumbled in the last two years from peaks of over $100 a barrel in June 2014 to about $45 a barrel Thursday.
How Did It Impact Oil, Copper, and Gold on April 18? Negotiations among 16 oil producers in Doha on Sunday ended without any accord after Saudi Arabia demanded all producers take part in a freeze.
The setback may ultimately prove temporary: The proposed agreement had less to do with actual output than optics: The cap would have been set thousands of barrels higher than actual production, keeping it from cutting into countries’ revenues or market share.
The expert also noted that Doha’s meeting confirmed the belief that OPEC is finished as price setting mechanism.
“What is clear coming out of this is that OPEC would no longer be the main driver of oil prices”, Lee told AFP. Iran wants to increase its production by a third, to four million barrels per day. Iran reported that it wouldn’t cut the production until its production levels reach pre-sanction levels.
But Iran maintained it would continue the increase in oil production it has followed since economic sanctions were lifted earlier this year.
While the Doha meeting resulted in no deal, one thing is for sure – Iran is going it alone when it comes to oil.
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“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. Producers from the US shale patch to the Venezuelan oil sands to Saudi Arabia’s desert oilfields have seen profits plummet, while governments dependent on oil and gas tax revenues have seen their budgets dissipate.
