Fallout From The Disastrous Doha Oil Producers Meeting: Is The Rally Over?

The highly-anticipated meeting of OPEC and non-OPEC global oil producers this weekend in Doha did very little to inspire confidence among oil investors that a timely solution to the massive crude oil glut is imminent. Although the purpose of the meeting was to discuss a potential global production freeze, Saudi Arabia and Iran could not agree over Iran’s participation in such a freeze.

Saudi Arabia demanded that Iran participate in any production freeze agreement. Iran, on the other hand, believes that it has every right to ramp crude production following the lifting of global sanctions against the country.

At one point during the meeting, Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman even threatened to flood the already crippled oil market with as much as 2 million barrels per day of additional crude oil if all the other meeting participants didn’t agree to the country’s terms for a freeze.

Commentary From The Meeting

“I don’t think anybody expected a major change in fundamentals on the meeting in the best-case scenario,” Antoine Halff of the Columbia Center on Global Energy Policy told Bloomberg.

“The fact that the group could not come up with a statement and a display of unity… is quite unprecedented, as is the mixed messaging from Saudi Arabia itself.”

Related Link: What Is The Oil Market Expecting From Global Producers Meeting? Not Much

While Halff now believes that a short-term spike in oil prices is off the table, he also argues that the majority of the recent rally in oil was more about fundamental improvements in the market than hopes of a freeze. Halff said that if the rally was all about a freeze, oil prices would be falling much more sharply than they are following the meeting.

Oil's Recent Performances

After rallying from as low as $26.05/bbl in February to as high as $43.69/bbl earlier this month, WTI crude prices are down only modestly in Monday’s session. News of the meeting’s unproductive results have the United States Oil Fund LP (ETF) USO trading down 0.8 percent in early trading.

Oil prices may be getting propped up somewhat by news that a Kuwait oil workers strike has cut the country’s crude output in half.

The fate of the recent oil rally may now hinge on the outcome of the strike, as well as any indication of whether or not Saudi Arabia’s threat to sharply ramp production was simply a bluff.

Disclosure: The author holds no position in the stocks mentioned.