Oil prices struggle ahead of Doha producer meeting
London (Apr 14) Crude-oil prices struggled on Thursday amid market skepticism about the outcome of a meeting between major producers slated for this weekend.
Heavyweight suppliers, including Saudi Arabia and Russia, are gathering in Doha, Qatar on Sunday to discuss curbing their output to support prices. However, doubts are growing that even if they manage to clinch an agreement, it may not be strong enough to alleviate the continuing global glut of crude.
“If there is to be a production freeze, rather than a cut, the impact on physical oil supplies will be limited,” the International Energy Agency said in its closely watched monthly market report on Thursday.
On the New York Mercantile Exchange CLK6, +0.36% , light, sweet crude futures for delivery in May traded at $41.71 a barrel, down $0.05 in the Globex electronic session. June Brent crude LCOM6, +0.43% on London’s ICE Futures exchange fell $0.06 to $44.11 a barrel. But both Brent and WTI pared earlier losses.
The talk about the freeze meeting has kept investors on edge in recent weeks. Prices have rallied by more than a third but the rally has been market by high volatility amid the lack of clarity about what can be agreed in Doha. Iran has already balked at participating in any deal as the country seeks to increase its production to pre-sanctions levels.
“On balance, we see the likelihood of a strongly-worded, formalized output freeze agreement between all participants—perhaps except Iran—as very slim,” said analysts at consultancy JBC Energy. “The key will be to find a wording that keeps the flame burning…and allows meeting participants to save face.”
JBC said that whatever the outcome of the meeting, it is “highly unlikely to have a meaningful impact on the path of actual physical oil supply.”
Still, the fact that so many major oil producing countries even agree to meet is an important signal for the market, said Michael Poulsen, oil analyst at Global Risk Management. “It is probably the symbolic gesture which will be the most important outcome,” Poulsen said.
Underscoring the continuing oversupply, U.S. crude inventories grew by more-than-expected 6.6 million last week, the Energy Information Administration said on Wednesday. The latest addition brought commercial stockpiles to a new high of more than 536 million barrels. However, production fell below 9 million barrels a day for the first time since September 2014.
“We think inventories are a key measure of the current weak fundamental balance in the market that the traders ignore at their financial peril,” said Tim Evans, a Citi Futures analyst.
Nymex reformulated gasoline blendstock RBK6, +0.34% —the benchmark gasoline contract — fell 1% to $1.51 a gallon. ICE gasoil changed hands at $372 a metric ton, down $5 from the previous settlement.
Sourve: MarketWatch
