Little Impact Seen on Oil Supplies If Doha Deal Struck, IEA Says

  • Saudi Arabia, Russia production close to record highs anyway
  • Talks of Doha meeting have helped boost prices, IEA says

The Difficulty of Determining an Oil Price Regime

An agreement by producing countries to freeze crude production at the Doha meeting on Sunday would have a limited impact on oil flows, the International Energy Agency said Thursday.

OPEC and non-OPEC countries -- including Russia and Saudi Arabia, the world’s two biggest crude producers -- will meet in Doha on April 17 in a bid to freeze production at January levels. A deal would represent the first attempt at coordinating oil production between the Organization of Petroleum Exporting Countries and producers outside the group in 15 years.

Yet the IEA sees scant impact on physical oil flows if a deal is struck.

“If there is to be a production freeze, rather than a cut, the impact on physical oil supplies will be limited,” the IEA said in its monthly report. Part of the reason is that Saudi Arabia and Russia are “already producing at or near record rates,” and “very little upside” is seen apart from Iran, which is aiming to recover lost market share after sanctions on its nuclear program were lifted in January.

“Any deal struck will not materially impact the global supply-demand balance during the first half” of this year, the IEA said.

Speculation about the Doha meeting has, however, contributed to recent support for oil prices, the IEA said. Prices have gained more than 35 percent since the first mention of a potential cooperation to freeze output between Saudi Arabia and Russia on Feb. 16.

The IEA estimates there are “few areas of growth” within the group of non-OPEC countries with only some countries able to increase output. However, the IEA said if Russia does not join the freeze, it could still surprise the market after it ramped up its output last month to another record high.

Saudi Arabia’s output last month remained above 10 million barrels a day for the 13th month in a row. That output reached its record high in July last year, at 10.57 million barrels a day.

The IEA views echo the findings of a survey of analysts and traders who also say a freeze deal at Doha is likely to have little impact on supply.

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