(VOVworld)- After 6 hours of negotiations in Doha, Qatar, on April 17 the world’s major oil producers failed reach a deal to limit oil production. Despite optimism ahead of the talks, the outcome reveals serious differences among oil producers on the issue of oil price increases.
Russia’s Minister of Energy Alexander Novak said Saudi Arabia, Qatar, Venezuela, and Russia came to an understanding on April 16th on a draft agreement to limiting oil prices, but one day later, some changed their position just before the further talks began. According to Novak, the global oil market may be rebalanced by mid 2017, 6 months later than the date set by the failed Doha deal.
No signs of oil output reduction
In recent years, oil producers in the Gulf Region have accelerated their oil production. According to the website oilprice.com, the number of Saudi oil wells increased from 58 in 2014 to 67 today. Saudi Arabia is seeking to expand its Khurais oil field by 2018, raising its output by 300,000 barrels per day. Last month, Amin Nasser, CEO of Saudi Aramco, the nation’s biggest oil group, said his company will not abandon any oil production or refinery project and is considering upgrading the Ras Tanura refinery to increase its capacity to 550,000 barrels per day.
Iraq, the second largest producer in the Organization of Petroleum Exporting Countries (OPEC), has steadily increased its oil production. The latest data released by Iraq oil marketing company SOMO show that Iraq’s oil output in March rose by 2% to a record level of 4.55 million barrels per day. Kuwait, another important member of OPEC, is working to increase its output. CEO Jamal Jaafar of the Kuwaiti Oil Company says Kuwait hopes to raise its oil output from the current 3 million barrels per day to 3.165 million barrels per day by late this year or next year.
Meanwhile, Iran’s Ministry of Petroleum is rejecting oil production limit until Iran’s production returns to its pre-sanction level.
Countries in the Gulf Region have showed no intention of slowing production. OPEC’s latest report estimated that global oil demand will reach 31.46 million barrels per day, 60,000 barrels lower than previously projected. These facts make effort to raise oil prices unrealistic.
Adverse impacts on oil market and economy
Failure to reach an agreement in Doha sent world oil prices sliding dramatically early this week. In Asia, the WTI crude oil price fell 2.2 USD to 36.16 USD per barrel. North Sea Brent crude fell 2.23 USD to 40.87 USD per barrel.
The oil price plunge has shaken many governments, particularly in oil -dependant countries like Venezuela, Russia and the OPEC members. Oil producers will continue to suffer losses of hundreds of billions of dollar. The Kuwait Financial Center (Markaz) projects that Gulf countries will borrow between 285 billion and 390 billion USD by 2020 to make up for budget deficits caused by low oil prices. Many countries have resorted to austerity measures. Thousands of oil workers in Kuwait have called strikes to protest planned wage cuts. Oil workers union chief Saif al-Qahtani warned of prolonged protests. The Kuwait government condemned protesters and urged the Kuwait Petroleum Company to deploy sufficient workers to maintain production.
Because the effort to limit crude oil production has failed, supply continues to exceed demand by 1.5 million barrels per day. With oil prices 60% lower than in mid-2014, recovery appears to be just a “pipe” dream.