By Joseph Horch,
International Business Writer
A deal between some 18 oil exporting countries fell apart Sunday, April 17, in Doha, the capital of the oil rich country, Qatar. Talks to freeze oil production at January output levels stalled, with some participants claiming they needed more time in order to work on any deal. Attendees included members and non-members from the Organization of Petroleum Exporting Countries (OPEC). However, absent from the talks was major oil producer Iran. Iran has been attempting to gain market share after economic sanctions over its nuclear policy were lifted.
Iranian oil minister Bijan Namdar Zanganeh said on Iranian state television that the nation didn’t want to send an emissary to the Doha meeting because “we can’t cooperate with them to freeze our own output.”
While Iran’s absence was highly notable, many are blaming Saudi Arabia’s insistence that Iran participate in the output freeze as the reason that the talks fell through.
In recent months, tensions between the influential Middle East powers have been growing. Saudi Arabia severed relations with Iran after an attack on its embassy in Tehran last week following the kingdom’s execution of Shia religious leader Nimr al-Nimr, who was put to death along with 46 mostly Sunni Muslims convicted on terrorism charges. Saudi Arabia, a predominantly Sunni kingdom, and Shia Iran have accused each other of backing proxies in the war in Yemen and Syria.
The Global benchmark Brent Crude was down 24 cents at $42.86. It had fallen $3 earlier. Crude oil has rallied since the freeze was first proposed in February. Failure to reach an agreement would lead to a “severe” drop in prices, Citigroup Inc. predicted before the meeting. Brent crude settled at $43.10 a barrel Friday in London, having risen by more than 50 percent from a 12-year low in January.
While analysts agreed any accord to emerge from Doha would have little impact on actual crude supplies because most attendees were already pumping at capacity, an oil workers’ strike in Kuwait, leading to a decrease in production, is being blamed for the price stability following the meeting.
The gulf nation’s crude production tumbled 60 percent to 1.1 million barrels a day and refineries scaled back operations because of the open-ended action regarding wages, said Saad Al-Azmi, deputy chief executive for finance and spokesman at Kuwait Oil Co. The disruption is equal in size to the global surplus and could boost prices on Monday, Dubai-based bank Emirates NBD PJSC predicted.
Saudi Arabia’s Prince Mohammed bin Salman said in April that if other major producers will not curb their production, Saudi Arabia will not either. Saudi Arabia, the world’s second largest producer of crude oil, said that if a freeze were to be agreed upon, that they would limit production to about 10.3 to 10.4 million barrels a day, down from 2014 levels of 11.4 million barrels a day.
With tensions rising in the Middle East and sustained low crude prices taking their toll on government revenues, it is only a matter of time before OPEC and non-OPEC members are forced to sit down and make a deal happen.
A version of this article appeared in the Tuesday, April 26th print edition.
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