Doha meet can stabilize oil prices

The reports of consensus over oil output freeze following talks between Saudi Arabia and Russia and signs that global glut will ease in the US, saw the crude climbing to the highest level in more than four months on Tuesday. Speculations were already rife that the two oil majors had reached an agreement, boosting expectations that a wider deal will be forged at a meeting in Doha on April 17.
Sunday’s talks will bring together OPEC members, led by Saudi Arabia and non-OPEC producers, such as Russia, to discuss how to ease an oil glut that has depressed prices for nearly two years.
Prices are still more than 60% below peaks of over $100 a barrel in mid-2014, despite recovering from near 13-year lows in February.
They had gained on Monday and Tuesday, after surging more than 8% the previous week.
But on Wednesday, US benchmark West Texas Intermediate for delivery in May was down 59 cents, or 1.4%, at $41.58. While Brent crude for June delivery, a more global benchmark, was trading 52 cents, or 1.16%, lower at $44.17 a barrel.
US inventories showed a surprise fall in last week’s US Department of Energy report. The market is looking to see if this is sustainable.
In Asia, energy firms led stock market rally on Wednesday as a strong trade report from China and news of a deal between Russia and Saudi Arabia to limit oil output injected traders with much-needed optimism.
The renewed confidence also saw the safe-haven yen retreat against the
dollar, having soared more than five percent since the start of the month.
US and European equities provided a perfect lead with healthy gains after Russian news agency Interfax reported about the ‘consensus’.
The output freeze news came as the US government said that US crude output was forecast to fall by 560,000 barrels per day in 2017 to 8.04 million bpd,
underscoring that the 21-month price rout is picking up steam.
The news raised hopes that at least a global glut, which saw prices plunge 75 percent from mid-2014 to February, can be addressed.
The UAE Minister of Energy has backed an OPEC-driven production freeze to help stabilise markets. “We believe that capping the levels of production by OPEC members would have a positive effect in balancing future demand with the
current oversupply,” said Suhail Mohammed Faraj Al Mazrouei in a statement.
It came after a deal was struck between Saudi Arabia, Qatar, Russia and Venezuela in February to hold production at January levels. OPEC’s output in Januray was at 33.1 million barrels per day, while the non-OPEC member Russia produced 10.9 million barrels per day.
Al Mazrouei had pointed out that the current prices will force producers to fix production levels and to limit investments in more costly types of oil.
The UAE is always open to cooperate with any oil producer as long as it serves the highest interest of producers and ensures market balance.
Saudi Arabia and Russia are at the highest oil-producing levels. They have what it takes to chalk out plan to cap the oil production with the backing of other main producers to stabilize the market.
As the low oil prices hit the global economy, the world looks forward to the Doha meet with high hopes to stabilize the oil prices.