After the failure of the this weekend between oil big, including Russia and Saudi Arabia, which was intended to set a cap on future production equivalent to the levels of January, the black gold prices have collapsed. We hope that the industry leaders could embark on a gradual reduction of the worldwide surplus had encouraged the prices in recent weeks. At this point we expect oil markets
1. Because the negotiations have failed?
Essentially the failure of the summit this weekend is due to Saudi Arabia and Iran. By participating, some hoped that Saudi Arabia – the second largest oil producer in the world – would agree, along with other prominent members of OPEC, the definition of a production limit. Iran, however, that following the lifting of economic sanctions is observing an increase in oil exports, has proved reluctant to join any initiative in this direction. When the plug was clear that Tehran would not change his mind, the Saudis have removed any possibility of agreement.
2. What does this mean for the global supply of oil?
The situation appears motionless. In January, the major producers, Russia and Saudi Arabia, were already pumping oil at very high levels. Daily production in Russia amounted to the second highest ever recorded. Probably, an agreement for a bond equal to similar levels would not make much difference in terms of world supply. Now, thanks to the shale revolution, the United States has become a decisive player for global markets. This year, local production has started to decline, and the International Energy Agency (IEA) estimates that the total non-OPEC output will fall by 700,000 barrels per day. To compensate, Iran seems determined to extract more. In fact, after the lifting of sanctions Tehran has accelerated to around 3.3 million barrels per day and vowed to reach 4 million.
3. What it means to OPEC?
In recent years the power of OPEC in world oil markets is steadily eroding. The sign still represents about a third of world production, but non-members, such as Russia, the US and China, is increasing its production, as well as its influence. On the other hand, despite the ups and downs and the established geopolitical differences between Saudi Arabia and Iran, in years past, OPEC had managed at least to agree on a collective policy. The failure of the Doha negotiations, in particular the wide divergence between the Iranian and the Saudi position, has further damaged the credibility of the group.
4. And speaking of global oil demand?
The weakening of economic growth in China and Latin America this year is expected to weigh on oil demand globally, intensifying the fear that there will not be enough demand to absorb the surplus. Last week OPEC cut its estimate for 2016 growth in oil demand of 50 thousand barrels per day. Current projections show an advance of 1.2 million barrels a day, to 94.18 million barrels.
5. So how you can drop the oil?
After the West Texas Intermediate in February reached a minimum of twelve years of $ 26.05 a barrel in recent weeks prices crude oil recovered. Shortly afterwards, the rumor that the Russians and OPEC could impose a limit to the offer have pushed up the prices over 40 dollars a barrel. However, given that the Doha negotiations have gone up in smoke, it is permissible to assume that the oil will collapse. The Natixis analysts estimate a fall of up to $ 30 per barrel. Others believe that the summit this weekend could never give rise to a major agreement. Therefore, the basic parameters of the market would be essentially unchanged, going to strengthen the probability that oil prices delay long around current levels for a while ‘.
Please click here to read this article in Inglese on The Wall Street Journal
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