Oil prices tumbled on Monday after a meeting by major exporters in Qatar collapsed without an agreement to freeze output. The impasse left the credibility of the OPEC producer cartel in tatters and the world awash with unwanted fuel. 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, oil analyst at BMI Research, a unit of rating agency Fitch.
But this isn’t just about oil for the Saudis. It’s as much about regional politics.
Peter Lee, oil analyst
Oil prices have fallen by as much as 70% 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. While tumbling oil prices hurt producer revenues, straining the budgets of energy exporters from Russia to Malaysia, they can also benefit consumers. Analysts Morgan Stanley said that “the lack of even a non-committal agreement after one was in place in February underscores the poor state of OPEC relations,” adding that “we now see a growing risk of higher OPEC supply”. Sunday’s meeting in Qatar’s capital Doha had been expected to finalise a deal to freeze output at January levels until October 2016 in an attempt to slow ballooning oversupply. But the agreement fell apart after top exporter Saudi Arabia demanded that Iran, which was not represented, should also sign up.