A spike in tensions between arch-rivals Saudi Arabia and Iran on Sunday appeared to ruin prospects of the first binding oil output deal in 15 years between OPEC and non-OPEC nations, and looked set to prompt another fall in the price of crude.
Failure to reach a global deal would signal the resumption of a battle for market share between key producers and likely halt a recent recovery in prices.
Some 18 Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC oil producers, including Russia, were set to met in the Qatari capital of Doha on Sunday morning and quickly rubber-stamp a deal to freeze output at January-levels until October 2016. But the meeting was postponed after OPEC’s de facto leader Saudi Arabia told participants it wanted all OPEC members to take part in the freeze, according to sources.
In January, OPEC countries produced 32.33 million barrels a day, higher than the 2015 average of 31.8 million barrels per day. A freeze in output would have put a break on the increasing supplies of crude oil, which have in turn led to crash in the price of the commodity to lows of below $30 a barrel. Riyadh had earlier insisted on excluding Iran from the talks because Tehran had refused to freeze production, seeking to regain market share after the lifting of Western sanctions against it in January.
With the deal running into trouble, oil ministers in Doha met Qatari emir, Sheikh Tamim bin Hamad al-Thani, who was instrumental in promoting output stability in recent months.Ministers started talks at around noon but no consesus could be reached, sources said. “I am not sure you can call it a freeze,” a source said.
A senior oil industry source said: “The problem now is to come up with something that excludes Iran, makes the Saudis happy and doesn’t upset Russia.”
“If there is no freeze, that would directly affect North American production going forward, perhaps something Saudis might like to see,” said Natixis oil analyst Abhishek Deshpande.