The upcoming meeting among the top oil producers to be held in Doha, Qatar on April 17, 2016 will have a crucial impact on the future oil prices. Any disagreements concerning limiting or freezing oil production level will lead to collapse of oil prices. The organizer must bear in mind that this meeting is very decisive and there should be no room for disagreement. If they cannot reach an agreement, it is better they do not meet or postpone the meeting for a later date. The message should be loud and clear that the oil producing countries just cannot afford any further deterioration of the oil prices.
This up-coming meeting follows the one that took place in Doha on February 2016 during which Saudi Arabia, Russia, Qatar and Venezuela agreed to freeze their oil production at January 2016 level. Most of the other oil producers agreed in principle to this decision except Iran which was hesitant to follow the decision. However, its agreement to freeze oil production will be essential for stabilizing oil prices for the rest of the year.
Oil prices had recovered and went above the $40 level but it dropped again due to Iran’s insistence on disagreeing to any freeze in production levels until its production reached 4 million barrels. However, the market is aware that Iran cannot reach this level of production soon and will require some months or until the end of this year to produce additional 500,000 barrels. This is a tactic that Iran is using to bargain and find a position for itself in the upcoming Doha meeting. Anyway, it is important for Iran to be present in that meeting.
Oil-producing countries should be prepared and should organize themselves to reach an agreement within a short time. They should start working behind the scenes to ensure smooth delivery. OPEC should take the lead and coordinate closely with Russia to calm its ally Iran and bring it to the table with an open mind.
They should know that OPEC can later accommodate Iran with its growing production when the oil prices stabilize at a level close to $45 per barrel.
The journey is long. Hard work is needed before the Doha meeting. Oil-producing countries cannot afford another miserable year of financial losses, shortage of cash and the burden of borrowing money from various sources, at the expense of the sovereignty of the states.
There is a choice. Success can serve us all.
By Kamel Al-Harami – Independent Oil Analyst