Photo: Reuters
Oil prices tumbled on Monday after a meeting by major exporters in Qatar collapsed without an agreement to freeze output, leaving the credibility of the OPEC producer cartel in tatters and the world awash with unwanted fuel, Reuters reports.
Tensions between Saudi Arabia and Iran were blamed for the failure, which revived industry fears that major government-controlled producers will increase their battle for market share by offering ever-steeper discounts.
“OPEC’s credibility to coordinate output is now very low,” said Peter Lee of BMI Research, a unit of rating agency Fitch. “This isn’t just about oil for the Saudis. It’s as much about regional politics.”
Morgan Stanley said that the failed deal “underscores the poor state of OPEC relations,” adding that “we now see a growing risk of higher OPEC supply,” especially as Saudi Arabia threatened it could hike output following the failed deal.
Oil prices have fallen by as much as 70 percent since mid-2014 as producers have pumped 1 to 2 million barrels of crude every day in excess of demand, leaving storage tanks around the world filled to the rims with unsold fuel.
Sunday’s meeting in Qatar’s capital Doha had been expected to finalize a deal to freeze output at January levels until October 2016 in an attempt to slow that ballooning oversupply.
But the agreement fell apart after top exporter Saudi Arabia demanded that Iran, which was not represented, should also sign up.