According to Reuters, the Organization of the Petroleum Exporting Countries (OPEC) said Wednesday that it would cut production by 1.2 million barrels a day from 33.6 million barrels and said it expects producers from outside the group, including Russia, to join with additional cuts totaling 600,000 barrels a day. On Thursday, 12/1, Azerbaijan said it was also willing to engage in talks on cuts while Indonesia suspended its membership.
The key point of disagreement arose between Iran and Saudi Arabia. Riyadh refuses to make any concessions to its regional archrival, who seek to increase their oil output to pre-sanction levels.
According to Global Risk Insights, The Doha failure reflects long-standing disagreements between the two Persian Gulf powers over regional supremacy and conflicts in Syria and Yemen. It also confirms the fact that Opec, and Saudi Arabia, lost their ability to act as a global swing producer, which puts the 56 year old Cartel’s existence and purpose into question.
In practice however, the meeting would not change much in terms of global demand and supply. The participating countries were discussing capping oil production at their current almost record high levels, which still leaves the markets well oversupplied.
Oil prices rose more than 3% today, the 20th of April, after a smaller-than-expected US crude build offset glut worries stirred by the end of a Kuwaiti strike and on speculation that major oil producers were meeting in Russia in May for another attempt at curtailing output.
Moscow, however, denied media reports of such an impending meeting.
Over the weekend, talks in Doha between the world’s largest oil producers ended without an agreement to limit production and supplies. Oil ministers from 16 nations came together in an effort to stabilize the global market. The roadblock in the discussions was Saudi Arabia and other Gulf nations refusal to agree on a deal unless all OPEC members joined in agreement. The Saudis have stated that they will not restrain production until there are commitments from the other major producing nations. This statement was aimed directly at Iran, which did not attend the meeting and has ruled out limiting its oil production until the levels return to what they had been before Western sanctions were imposed. It is obvious that the chances for a deal have fallen victim to the geopolitical conflict between Saudi Arabia and Iran.
While the Doha talks have failed to bring about a path towards ending…
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Oil ministers from Saudi Arabia, Qatar, Venezuela and Russia agreed to keep production at January’s levels on Tuesday, but only as long as other major producers do the same. Iran said it would back any measures to stabilize the markets, but avoided committing to capping its own production. So unless Iran also commits, it could put the agreement on hold.
This deal could be the first joint OPEC and non-OPEC deal in 15 years aimed at tackling a growing glut and helping prices recover.