Oil prices dropped today, Monday, 18th April after the top producers of crude oil failed to reach a unanimous decision on putting a lid on the global supply of oil. This in turn caused fears of price plunging.
The talks in Doha among the OPEC members and other top producers of oil outside the bloc was supposed to help stabilize the global oil market, this expectation initially caused oil prices to increase.
However this did not last as the price fell as a result of the Crown prince of Saudi Arabia quitting the talks, after an agreement could not be reached. Saudi Arabia is the top crude oil exporter in the world and many had hoped that it would ease the supply, however the country vowed only to comply with the decision if all countries, especially Iran, Saudi Arabia’s regional rival complied with it.
Iran’s failure to comply with a UN nuclear deal caused sanctions to be imposed on he nation. Following the successful completion of the requirement of the nuclear deal, the sanctions were lifted earlier this year. This meant Iran’s return on the crude oil marketing scene.
Iran’s re-emergence in the oil market also meant an increase in the production of crude oil, therefore leading to even more pressure on the downward slope of world oil prices. Iran however, has refused to cap their crude oil output as the nation intends to make up for lost times.
“Expectations for the talks to end with an agreement were high, and the lack of one damaged the credibility of future meetings to support the oil market,” said Bernard Aw, market strategist at IG Markets Singapore.
Angus Nicholson, also of IG Markets, told AFP that geopolitics was behind the failure of the Doha talks.
“With Saudi Arabia fighting proxy wars with Iran in Yemen and Syria/Iraq, it is understandable that they had little inclination to freeze their own production and make way for newly sanctions-free Iran to increase their market share,” he said.
“The market share battle is expected to rage on as the failure of the oil-freeze pact could set off another price drop,” Gupta said.
Top exporters of crude oil, especially African countries like Angola and Nigeria which has an economy that is solely affected by the price of oil have been sorely upset by the fall in the price of crude oil.
Qatar’s Energy Minister Mohammed Al Sada said at news conference after the meeting that OPEC members will consult among themselves until the next OPEC meeting in June.