On Tuesday, four of the world’s largest crude producers gave off the sign of a production freeze, but Tom Kloza, co-founder of the Oil Price Information Service, said such an agreement seems improbable. Oil prices were seesawing between strong gains and modest losses in early trading Tuesday, after Saudi Arabia, Russia, Qatar, and Venezuela said when other producers follow their lead, they would keep output stable at January levels.
Though Iran, after the lifting of years of sanctions, back on the world oil market and quickly ruined hopes of an agreement, stating it would not give up its share. “People recognize that getting those four parties together and actually having a production freeze is a little bit like getting Johnny Manziel and Charlie Sheen to pledge to live very, very clean lives for the next few years,” Kloza announced, making a similarity to reports of unpredictable behavior by Cleveland Browns quarterback Manziel and actor Sheen.
Crude has currently escaped off 13-year lows. But the weak commodity has crashed more 70 percent since June 2014 as oversupply and dropping demand fears continue. “There’s too much oil. It’s that plain and simple. And [major producers] would have to cut not to freeze to really impact [the market],” Kloza continued, “I think you can expect that they’re all going to produce willy-nilly like they have. And it’s going to take some time for the oil market to rebalance.” Freezing output at January levels in a “hopping” economy would produce 2 million barrels per day in excess oil supply, mentioned Kloza, global head of energy analysis at OPIS, a broad source for petroleum pricing and news information. “And if the economy slows down, that could be 2½ million barrels a day [of] too much oil.”