Doha deal falls apart, oil prices can slide to $30 in days

Doha deal falls apart, oil prices can slide to $30 in days

Sunday, April 17, 2016 11:33 pm


Doha meeting: no deal raeched

Doha meeting: no deal raeched

Just as predicted, a deal to freeze oil output by OPEC and non-OPEC producers fell apart on Sunday after Saudi Arabia was adamant that  Iran must join in the talks.

All appeals to the Saudis by the Russians and other OPEC members to save the agreement and help prop up crude prices, fell on deaf ears.

The development will revive oil industry fears that major producers are embarking again on a battle for market share, especially after Riyadh threatened to raise output steeply if no freeze deal were reached.

Iran is also pledging to ramp up production following the lifting of Western sanctions in January, making a compromise with Riyadh almost impossible as the two fight proxy wars in Yemen and Syria.

Delegates leave the Doha meeting without any agreement

Delegates leave the Doha meeting without any agreement

Some 18 oil nations, including non-OPEC Russia, gathered in the Qatari capital of Doha for what was expected to be the rubber-stamping of a deal – in the making since February – to stabilize output at January levels until October 2016.

“Without a deal, the likelihood of markets balancing is now pushed back to mid-2017. We will see a lot of speculators getting out next week,” said Deshpande, who added that prices could fall close to $30 per barrel.

 

 

But OPEC’s de facto leader Saudi Arabia told participants it wanted all members of the Organization of the Petroleum Exporting Countries to take part in the freeze, including Iran, which was absent from the talks.

Tehran had refused to stabilize production, seeking to regain market share post-sanctions.

After five hours of fierce debate about the wording of a communique – including between Saudi Arabia and Russia – delegates and ministers announced no deal had been reached.

“We concluded we all need time to consult further,” Qatar’s energy minister Mohammed al-Sada told reporters. Several OPEC sources said if Iran agreed to join the freeze at the next OPEC meeting on June 2, talks with non-OPEC producers could resume.

Russian oil minister Alexander Novak called the Saudi demand “unreasonable” and said he was disappointed as he had come to Doha under the impression that all sides would sign the deal instead of debating it.

Novak said Russia was not shutting the door on a deal but the government would not restrain output for now.

Russia is a key ally of Iran and has been defending Tehran’s right to raise output post-sanctions while also supporting the Islamic Republic in many of its conflicts with Riyadh.

TOUGH SAUDI STANCE

The failure to reach a global deal could halt a recent recovery in oil prices.

“With no deal today, markets’ confidence in OPEC’s ability to achieve any sensible supply balancing act is likely to diminish and this is surely bearish for the oil markets, where prices had rallied partly on expectations of a deal,” said Natixis oil analyst Abhishek Deshpande.

In December, OPEC failed to agree on output policy for the first time in years after Iran disagreed over a production ceiling proposed by Saudi Arabia, arguing again that it wanted to boost output post-sanctions.

“Without a deal, the likelihood of markets balancing is now pushed back to mid-2017. We will see a lot of speculators getting out next week,” said Deshpande, who added that prices could fall close to $30 per barrel.

Brent oil LCOc1 has risen to nearly $45 a barrel, up 60 percent from January lows, on optimism that a deal would help ease the supply glut that has seen prices sink from levels as high as $115 hit in mid-2014.

In early trading in Asia, the no-deal has already begun taking its toll on the market.

Brent went  down 6.03%, $2.60 at $40.50/bbl, according to initial reports.

*From Reuters


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