OPEC nations met in Qatar this weekend to discuss the possibility of a freeze in oil production, as a way to boost prices – but the oil producers couldn’t come to an agreement.
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The inability of OPEC countries and Russian Federation to freeze production levels means they will likely continue to pump oil at near-record rates.
The talks collapsed after OPEC kingpin Saudi Arabia demanded that Iran also agree to cap its oil production.
Oil had rebounded in recent weeks amid speculation that a deal would be reached in Doha as US production fell.
Brent crude futures fell nearly 7 per cent in early trading on Monday with prices now at around $40 per barrel. “From here a physical, internationally linked oil market will discover prices locally”, Barden said.
Iran was asked not to attend the big meeting Sunday in Doha, Qatar, if it was not willing to sign up to a production freeze, an Iranian source told CNNMoney.
Economists are optimistic that the oil price can sustain at US$35-US$45 per barrel level this year.
This could have a negative impact on oil producers’ prices like QEP Resources (QEP), WPX Energy (WPX), Carrizo Oil & Gas (CRZO), ExxonMobil (XOM), the Pro Shares Ultra Bloomberg Crude Oil ETF (UCO), and the SPDR S&P Oil and Gas Exploration and Production ETF (XOP).
The oil market will remain oversupplied in the near term and the potential to test the 1999 lows of $9 per barrel is very real, Sam Barden, the director of Wimpole International, an energy market development company believes. “Iraq’s view is to have a freeze in output for a short period to help protect the interests of both producers and consumers equally by easing the surplus from the market and improving prices”.
Oil prices may be getting propped up somewhat by news that a Kuwait oil workers strike has cut the country’s crude output in half.
It is expected that the consensus issue being canvassed by Kachikwu will be pursued vigorously at the next OPEC ministerial meeting slated for June in Vienna, Austria. Estimates place global demand at 1.2 million barrels per day in 2016, as opposed to past year when 1.8 million barrels per day were required.
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Saudi Arabia is the global leader in oil exports.
