OPEC isn’t what it used to be.
Ahead of a planned meeting of most of the cartel and other major oil producers in Qatar to approve a freeze on oil production, some OPEC members are pumping record levels of crude even as prices wallow at less than half their level two years ago – a clear sign of the dissension gripping the group.
While markets may well react off any decision made on Sunday in Doha, analysts predict low prices will continue through this year and into the next as producers keep pumping to keep their government budgets afloat.
That calls into question what long-term gain producers can expect from a promised freeze, and indeed how much power OPEC now wields as US shale firms stand poised to re-enter the market if prices rise.
“We put the probability of a successful freeze agreement … at 50 per cent,” Societe Generale analyst Michael Wittner wrote this month.
“There is simply a tremendous amount of uncertainty.”
At least 15 oil-producing countries representing about 73 per cent of world output are expected at the Doha meeting, Qatar’s energy minister Mohammed bin Saleh al-Sada has said.
The gathering follows a surprise Doha meeting in February between Qatar, Russia, Saudi Arabia and Venezuela, in which they pledged to cap their crude output to their January levels if other producers do the same.
The countries hope the cap will help global oil prices rebound from their dramatic fall since summer 2014, when prices stood at above $US100 a barrel, though no one is talking seriously about the more dramatic step of reducing global supply by collectively cutting production for now.
Prices dropped briefly under $US30 a barrel, a 12-year low, in January, but have climbed to around $US40 a barrel this week, boosted in part by market speculation about the coming meeting.