Read what world’s most powerful oil producers did to stabilize price

 
Tension is mounting among Organisation of Petroleum Exporting Countries (OPEC) member states as four of its most powerful members have decided to freeze oil production at current levels.

This agreement was reached a few hours ago by two of the world’s most powerful oil producers, thereby dashing hopes of a supply cut for the world’s glutted market. According to the The Telegraph, a meeting of Russian, Venezuelan, Qatari and Saudi Arabian oil ministers in Doha today ended with a deal to fix production at January levels, this they say is pending on the agreement by other top producers like Iran and Iraq.


The speculations of an understanding between Saudi and Russia to limit output and help stabilise prices may have also led to the decision to freeze the production. In recent weeks, there had been reports about oil rallying sharply in anticipation of the meeting, especially with the prospect of a paring back of supply led by OPEC’s major leader and its biggest non-cartel rival.

This announcement, however, did not in anyway encourage traders, instead indicating that the world’s oil giants would continue to pump at record levels that has seen the supply glut hit more than a million barrels a day. Saudi’s oil minister, Ali al-Naimi who spoke of the new decision in Doha Qatar today, said:

“This is the beginning of a process which we will assess in the next few months and decide whether we need other steps to stabilise and approve the market.” He also added: “Freezing now at the January level is adequate for the market. We don’t want significant gyrations in prices, we want to meet demand. We want a stable oil price.”

In a related development, Iranian sources informed Reuters that the only condition the Islamic Republic would consider freezing production is when its production levels hits pre-sanction levels, of more than 500,000 barrels a day. Analysts at Energy Aspects had earlier today noted that the Saudi’s failure to broker a deal with its rivals would damage the kingdom’s “credibility”. “Saudi Arabia will not act unilaterally and key actors, namely Iran, Iraq, and Russia, must join any potential cut. wrote.

“If those conditions are not met, Saudi Arabia may still decide to cut when it can influence the market again,” they wrote. According to BBC, City Index analyst, Fawad Razaqzada noted that the latest move by the top oil brokers had disappointed the market slightly because many had hoped for a cut rather than a production freeze.

He said: “In the short term, oil prices may come under some pressure. Nevertheless, it is a step in the right direction and if other major producers follow suit then at the very least it should help to prevent oil prices from suffering further big falls.” Olivier Jakob, a Petromatrix strategist, added also that, “It’s really the first supply management decision taken since November 2014, so even though there will be some that will try to discount it and say it’s not a cut, it’s a change.

It is a big change in policy.” Just one week ago, oil prices were said to have risen, paring earlier losses after fresh comments from Russia about its openness to talk with OPEC over output cuts helped revive hope among investors that the world’s largest producers could act to boost prices. Russian Foreign Minister Sergei Lavrov said if there is consensus among the OPEC and non-OPEC members to meet, then they will meet.