New to site?


Lost password? (X)

Already have an account?



Oil producers risk new crude price collapse

HomeUncategorizedOil producers risk new crude price collapse
Oil producers risk new crude price collapse

Producing nations risk an oil bust if they don’t reach a freeze agreement of some sort when they meet in Doha, Qatar, this weekend.

Market expectations are high and rising for a deal, and crude futures have been climbing as a result, but an accord that would halt production growth will be difficult to reach and difficult to keep. Even if there is an agreement among OPEC and non-OPEC producers, capping production would still leave a glut of oil on the world market.

Oil saw its latest pop after Russia’s representative to OPEC was quoted by Interfax on Tuesday saying that Russia hopes to reach a deal even though there are disagreements between Saudi Arabia and Iran. West Texas Intermediate futures settled at $42.17 per barrel, their highest close since November. Brent rose close to $45 per barrel.

“I think with all the countries gathering, if there is not an agreement, prices will fall sharply and for each of them, it means new pain in their budget. It will hurt them a lot,” said Daniel Yergin, vice chairman of IHS. “Being able to sustain prices convincingly above $40 is very much in their interest.”

Oil is now up 60 percent from where it bottomed in February, just five days before Saudi Arabia, Russia, Qatar and Venezuela said they would freeze production if others participated.

“I think there’s a lot invested now in a successful conclusion to this meeting so it would seem real easy to disappoint come Monday,” said John Kilduff, partner at Again Capital. Analysts say oil has seen most of the gains it would get from a freeze agreement, and Kilduff believes it could even trader lower on the news.

Some analysts do not expect a deal, and others say it’s still unclear how close the key players are to an accord. Interfax also reported that Russia said Iran was not critical to a production deal.

“The headlines are just reflecting the optimism from the Russian camp,” said Chris Weafer, senior partner at Macro-Advisory. “The Russians say there will be a freeze agreement because they want one, and they have no other choice. It’s quite clear that the Saudis don’t want to go to this meeting. This is something they’ve been almost dragged into, and they’ve indicated they prefer decisions stay within OPEC.”

CNBC Has More


    Related Posts