Oil prices increased on Wednesday due to a proclamation that major exporters would convene in April in Qatar to consider a plan to restrict production, and also due to increasing signals of a decrease in U.S. Crude production.
Oil producers whom are and are not members of OPEC (Organization of the Petroleum Exporting Countries) will assemble and discuss the proposal in Qatar’s capital city of Doha on April 17th, according to the oil minister of Qatar, Mohammed Bin Saleh Al-Sada. There are roughly 15 nations that include members and non-members of OPEC that are showing their support for the output freeze, and those nations account for nearly 73% of total global oil output.
In February, the nations of Qatar, Venezuela, Saudi Arabia, and Russia (Russia is not a member of OPEC) consented to a deal which capped oil output at January levels, however Iran has openly declined to join in on such an agreement. Russian Energy Minister Alexander Novak supports Iran’s choice to increase their output after being under sanctions for years, and also believes an output agreement could be reached without Iran. Kuwait also intends to cooperate according to their oil minister, Anas al-Saleh.
Oil market analysts do not believe that this agreement will be severe enough to completely stabilize the price of oil. This is due to the fact that supply has been vastly surpassing demand recently, by a margin of nearly 1 million barrels per day. Thomas Pugh, analyst at Capital Economics, shared his views on the oil producers’ agreement and the effect it will have on the price of oil, “Any such deal would still not be a game changer. It would really just maintain the excess supply that is now in place.”
In contrast, Standard Chartered declared that a reduction of oil production from non-OPEC members could potentially cause the price of Crude to climb back to roughly $60 a barrel by the end of the year. An official from Standard Chartered stated how the bank feels about the future movements of oil prices, We think that in coming months supply-side concerns will dominate, particularly when global inventories start to fall, which we think will happen in the third quarter.”