At least 18 nations attended the Doha talks yesterday, including the world’s largest crude producers Russia and Saudi Arabia. The third largest, the US, was absent. It didn’t matter as the Saudis sank any deal.
The Saudis made it clear on Saturday, ahead of the meeting, that they had very strict conditions for a freeze.
Saudi Arabia’s top oil official, Deputy Crown Prince Mohammed bin Salman, said in an interview with Bloomberg his country could boost output immediately and almost double it long term, if it was of a mind to do that (but that will cost billions of dollars).
He made clear that Saudi Arabia would only restrain its output if all other major producers, including Iran, agree to freeze their production. And that change of tack killed any chances of a deal being reached.
His comments put the cat well and truly among the other producer pigeons who had been claiming a freeze is coming and will help send prices higher.
There are around 1.5 million barrels a day of overproduction at the moment. American production is falling slowly (it’s now under 9 million barrels a day, and expected to fall to around 8.7 million barrels a day by year’s end).
Iran will add another million barrels a day of production in the next year, which will make it harder to cut the surplus and world economic growth is not strong enough to make significant inroads into the surplus either for the rest of this year.
The freeze proposal had helped oil prices to rise over 60% from a 12-year low near $US27 a barrel in January, despite little or no change to the market’s glut of oil and oil products (especially diesel).
Now prices will be headed lower – how low no one knows.
West Texas Intermediate crude for May delivery fell $US1.14 to close at $US40.36 a barrel on the New York Mercantile Exchange early Saturday morning.
It was the biggest decline since April 4. Futures rose 1.6% last week. Brent futures for June settlement slipped 74 cents, or 1.7%, to $US43.10 a barrel in London. a gain of 2.8% last week.
Prices briefly trimmed some of their earlier losses on Friday after Baker Hughes reported the number of active oil drilling rigs in use in the US fell by 3 to 351 as of last Friday. That was the fourth weekly decline in a row.
May West Texas Intermediate crude futures fell $US1.14, or 2.8%, to settle at $US40.36 a barrel in New York.
US futures prices fell Wednesday, Thursday and Friday, but still ended the week up 1.6%.
In London, June Brent crude, the global oil benchmark, fell 74 cents, or 1.7%, to $US43.10 a barrel, to be up around 2.7% for the week.
Comex June gold futures settled $US8.10, or 0.7%, higher at $US1,234.60 an ounce. That meant a loss for the week of around 0.8%, the first weekly drop in three weeks.
Silver futures ended 14 cents, or 0.9%, higher at $US16.31 an ounce on Comex for a sharp 6% gain over the week.
And Comex May copper fell 1.8 cents, or 0.8%, to settle at $US2.153 a pound, up more than 3% for the week.
