The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.
Anindya Kumar Saha, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur
Oil’s leading exporters met at Doha on 18th April 2016 to come to a conclusion to cut oil output and boost oil prices. But, the talks ended without any agreement.
Qatar’s energy minister Mohammed bin Saleh al-Sada said that the oil producers needed “more time”.
Most Opec members attended the meeting except Iran. Iranian officials have repeatedly made it clear they have no intention of participating in a production freeze, though they appear happy to support others doing it.
It was expected that Iranian officials would not commit to freezing output at January levels, the point at which nuclear sanctions over Iran were lifted.
With Saudi Arabia’s stance of freezing output to January levels only if all OPEC members agreed, it became more clear that an agreement was unlikely to be reached.
The failure to agree a freeze is not going to help oil exporters desperate to see the price of crude oil rise. Oil producing countries are facing large issues due to low oil prices. Even Saudi Arabia , despite having significant financial buffers is overhauling its public finances and trying to diversify its economy away from oil.
Other major oil producers like Venezuela are in massive political and economic crisis as oil consists of 95% of their exports. Angola which is an OPEC member has even gone to IMF to negotiate financial assistance.
The failure to reach an agreement meant oil prices took a tumble and share markets were hit by this development.
The biggest concern is that oil price is now hovering at $45.10 from it’s low of $27.10 in Jan , 2016 only with the expectation that ultimately major oil producing countries will agree on freezing oil production levels.
But, if OPEC continues to be unable to come to an agreement then it could mean oil prices taking a nosedive again.
The next scheduled Opec meeting is in June and it could be a pivotal meeting for the future of a lot of countries and organisations.