Oil producers seek to shore up crude rally with mid-April summit to discuss output freeze

Oil producers from OPEC and out of doors the group are finalizing an agenda to discuss freezing output in a meeting in Qatar in mid-April, the latest move in an offer by financially stricken crude exporters to shift the dynamics of the over-supplied market.

Qatar’s oil minister said that countries would meet in the nation’s capital Doha on April 17, without providing information on who would attend. The participation of Iran, the only OPEC member poised to increase supply significantly, is seen as crucial for the offer to re-balance the market, however the meeting might have to go ahead with no Persian Gulf nation, according to two delegates who asked to not be identified since the talks are private.

Prices have rallied a lot more than 30 per cent since a mid-February proposal by Saudi Arabia, Russia, Venezuela and Qatar to cap oil output and lower a worldwide surplus that had seen prices slump to 12-year low in January. The summit in April would seek commitments from the wider range of producers both within and out of doors the Organization of Petroleum Exporting Countries.

Kuwait was the very first other OPEC member to confirm it might attend, according to an e-mailed statement from the oil minister. Saudi Oil Minister Ali al-Naimi and the Russian counterpart Alexander Novak, who represent the world’s largest exporters, will talk about the meeting on Wednesday by telephone, one person said. Delegates from four OPEC members said they hadn’t yet received an invite.

Related

If oil prices have flattened, the very best isn’t necessarily that far awayPeter Tertzakian: The way forward for the oil and gas business depends on who can change and innovate fastestWhy it is now time for Alberta to think about hedging to protect oil revenue


Latest Date

April 17 may be the latest inside a number of dates suggested for follow-up talks on the freeze. Nigerian Petroleum Minister Emmanuel Kachikwu said on March 3 that those talks would be held in Russia on March 20. The following day, Russian Energy Minister Novak told state television channel Rossiya 24 that a meeting could take place between March 20 and April 1 in Russia, Doha or Vienna.

The proposed freeze “put a floor under oil prices,” Qatari Oil Minister Mohammad Al-Sada said within an e-mailed statement on Wednesday. “Up to now, around 15 OPEC and non-OPEC producers, comprising about 73 per cent of worldwide oil output, support this initiative.”

Oil rallied after the Qatari statement, gaining as much 2.2 per cent to US$39.60 a barrel working in london.

Iran Increase

There are reasons to be doubtful the planned freeze can radically alter an oil market that’s fallen victim to a global fight for share of the market, causing stockpiles to rise to a record high. Most significantly, Iran needs to increase production after the end of economic sanctions and has said hello won’t participate in any accord until its output has recovered.

Iran boosted output by 187,800 barrels each day to three.13 million each day in February, the biggest monthly gain since 1997, OPEC said in the monthly report on Monday.

Brazil will also add more than 100,000 barrels of supply this year and has shown little curiosity about taking part.

“We will now see if OPEC and Russia can freeze the bears within the oil market,” said Olivier Jakob, md at consultants Petromatrix GmbH. “The value of the agreement is that it could take away the perception that OPEC is fighting for market share.”

Other forces have driven prices higher in recent weeks. Outages from Iraq and Nigeria have disrupted more than 800,000 barrels a day of supply and tightened the Brent market, according to Citigroup Inc. And falling drilling activity in the U.S. shale industry has witnessed analysts raise forecasts for declines in North American production.

One key question is how fast shale production could come back if OPEC and some non-OPEC producers succeed in driving prices higher.

“It’s unsurprising they’d be willing to agree to this since the outlook for a further production increase was quite limited,” Jeff Currie, global head of commodities research at Goldman Sachs Group Inc., said within an interview on Bloomberg Television. “You can’t manage a cartel how you accustomed to.”

Bloomberg News