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Oil producers fail to reach deal in Doha

18 April 2016 15:03 (UTC+04:00)
Oil producers fail to reach deal in Doha

By Fatma Babayeva

The much anticipated meeting of the world's top oil producers in Doha on April 17 has ended with no deal on hand to freeze oil production freeze. Some experts believe it may have negative effect on the oil prices.

OPEC member states and non-OPEC major oil producers met in Qatari capital Doha last Sunday to discuss the issue about freezing the oil output in the market in order to achieve stabilization in the oil market and push the prices up. However, the participants of the meeting failed to freeze production at the levels of early 2016 as previously planned.

Earlier, Mohammed bin Saleh al-Sada, energy minister of Qatar said 15 oil-producing countries are expected to be present at the Doha meeting, which comprise about 73 percent of world oil output.

The root reason for the failure is believed to the geopolitical tensions between Saudi Arabia and Iran.

Iran's refusal to attend the Doha meeting is evaluated as the main reason for such fruitless end of talks.

Earlier, Saudi Arabia stated that it will only freeze its oil output in the market if other major producers and especially, Iran do so. Iran said that Tehran would not join the oil output freeze plan in its turn.

Iran's Petroleum Minister Bijan Zanganeh made a right decision by not participating in oil-producing & exporter countries, said Mahmoud Khagani, energy expert in exclusive article for Trend.

The expert believes that freezing the current production is meaningless since the major producers that attended the meeting are producing at the levels of their maximum production capacity.

Khagani emphasized that the Doha meeting is designed for Saudis and its allies to show that they are still a matter in the oil market. However, Saudi Arabia has no role as swing producer in the market any longer and this role is now transferred to the U.S.

"The question is that how long OPEC major producers, particularly Saudis can stand current low oil prices?" he questioned.

Meanwhile, during the gathering in Doha, OPEC producers told non-OPEC members that firstly, the OPEC members need to reach a deal among themselves, possibly during June meeting. Only then, the cartel will be able to invite other producers to join the freezing act.

Chris Cook, a senior research fellow at University College London thinks that unless there will be a drastic cut by Saudis, low oil prices will continue throughout the current year and 2017.

Moreover, JP Morgan's analysts stressed that some (OPEC) oil ministers' commentaries could be almost interpreted as being the second scenario they highlighted in their weekly notes - no agreement, but keep the dialogue open.

The disparity in views of participants left the bank's analysts in no doubt that the outcome is materially weaker than the market was anticipating.

In addition, it was not the first attempt by the oil producers to support oil prices which started to collapse from June 2014. Representatives from Saudi Arabia, Qatar, Venezuela, and Russia discussed possible measures to stabilize the current situation in the oil market and production freeze in February 2016.

Furthermore, Russia's negotiations with OPEC member states on freezing oil production levels may continue, but it requires additional time to consider positions of Saudi Arabia and Iran toward the deal, Vladimir Voronkov, Russia’s permanent representative to OPEC said on April 17, Sputnik reported.

Eulogio del Pino, Venezuelian Petroleum Minister also said on the eve of Doha meeting that Venezuela respects Iran's position regarding the freezing of oil as a sovereign state deciding what it wants, RIA Novosti reported.

Earlier, Iranian Petroleum Minister said that his country does not intend to participate in the discussions on freezing oil production until it will increase production to 4 million barrels per day.

In order for oil freezing act to be successful, some experts believe that U.S. also needs to be a part of it since it is one of the major players in the market.

Overall, Doha meeting could not have a positive effect on falling oil prices. The major oil producers’ initiative to put a cap on current production level has failed. The market seems to continue suffering from oil glut for now.

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Fatma Babayeva is AzerNews’ staff journalist, follow her on Twitter: @Fatma_Babayeva

Follow us on Twitter @AzerNewsAz

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