The OPEC summit in Doha, Qatar ended without an agreement on Sunday, as leaders failed to strike a deal to freeze output and boost sagging crude prices, according to CNBC reports. The conference’s failure sent crude prices tumbling in early trading on the NYMEX, which fell by more than 6% as traders resumed the commodity’s sell-off. Stock futures also fell, indicative of a lower opening on Monday morning on Wall Street.
Initially, the meeting’s outcome was thrown into doubt after Iran made a last minute decision not to attend and Saudi Arabia vowed not to halt or freeze production unless other major producers did the same. Amid strains between the regional rivals, nearly 20 of the world’s largest oil exporters could not find enough common ground to hold the line on output after marathon talks.
The dynamic has left the world awash in oil supply that has sent prices reeling. All eyes now turn to June’s meeting, where the oil cartel’s hand may be forced if crude prices begin another downward spiral. The failure of the summit could also lead to a renewed drop in crude prices, which only recently have begun to recover.
Recently, oil prices have crept up from multi-year lows below $30, to levels just above $40 on Friday; however, Brent crude is far below a multi-year high above $100 set in 2014, and is down nearly 40% over the last year. The latest rally, which took crude 55% from its lows, was in part fueled by optimism producers would reach a deal to freeze production.
Iran is strongly resistant to the idea of an output freeze, as it attempts to recoup lost market share after being freed from the yoke of Western sanctions. With the country declining to participate, the meeting’s delegates appeared to doubt how effective a freeze could be if it didn’t include Iran.
“With Iran, we respect their position and through further consultation, we don’t know how their future will unroll,” said Mohammad Saleh al Sada, Qatar’s oil minister. “It was a sovereign decision by Iran.”
Market observers had hoped that the meeting’s participants could strike a ‘gentleman’s agreement’ that would at least save face and serve as a bridge to June’s OPEC meeting; however, the collapse of the talks suggest that global crude prices may come under renewed pressure.
Selling may be limited because of a strike in Kuwait that has taken more than 1.5 million barrels a day off line. Kuwait’s workers started an open ended strike this weekend over pay and benefit cuts.
The U.S. shale boom has driven up the world’s oil supply and depressed prices. While consumers have received the equivalent of a massive tax cut through cheaper oil and gas prices, the drop in crude has made it uneconomical for many shale companies to continue to churn out oil.
Last year, U.S. domestic production surged above 9 million barrels per day, the highest in at least 3 decades. Recently, the U.S. Energy Information Agency cut its output forecasts for 2016 to 8.6. million barrels per day.
