The unexpected has happened. The first meeting of oil producing countries last Sunday ended in a huge failure despite all preparations carried out behind closed doors were satisfactory.
Representatives from 18 oil producing countries had gathered for the meeting in order to stabilize and strengthen the oil prices. However, the meeting ended with a huge blow and a message to OPEC to “put its house firmly in order before calling for the next meeting”.
The atmosphere in Doha on Sunday morning was positive, as all participants were optimistic that great results would come from the meeting. However, six hours of lengthy discussions ended up in the air without reaching an agreement.
Nobody knows what exactly happened but it seems the only obstacle was Iran’s firm stance to not be part of the agreement to freeze oil production at January 2016 level. Saudi Arabia had insisted on everyone being a part of the agreement without any exception. Despite assuring that it will attend the meeting in Doha, Iran decided on Saturday that it will not attend and it will not be part of such an agreement.
Saudi Arabia’s stance was clear and it insisted that all 18 oil producing countries should agree to freeze oil production.
Now it seems politics will have higher precedence than oil prices, especially with Saudi Arabia stating that they “do not care if the oil costs $30 or $70 per barrel”. It has now become a part of their policy that we have to either be in line with them or have no deal at all. Therefore, we have to consider the Saudi oil policy seriously in the future.
Surprisingly, the oil prices did not fall as expected by all. It continued to stay at the level of $40 per barrel.
Another event that took place last week was the strike held by the oil syndicates in Kuwait, which reduced its oil production by 50-60 percent to 1.1 million barrels per day. However, this oil strike came at the right time like a gift from nowhere for the oil industry, as it helped in stabilizing the oil prices for some time and reducing the surplus.
What is the next step? Who will initiate the discussions again? The next OPEC meeting will be in June this year so hopefully some developments could happen in the coming months, which however is very unlikely.
By Kamel Al-Harami – Independent Oil Analyst