Officials from many of the world’s top oil-producing nations gather in Doha, Qatar, this weekend with the goal of trying to cobble together an agreement to limit output in a bid to boost or at hold the line on depressed prices.
But given the continuing glut of oil, many observers say that even if a production freeze agreement is reached, prices are likely to remain stable at least into summer, USA Today reports.
“To agree to a cap or a freeze, it’s not a binding constraint,” says Ed Hirs, energy economist at the University of Houston. “It really should not have any impact on the market apart from the window dressing.” After all, he says, they are “not going to run out and drill a bunch of new wells.”
In an oil production market searching for good news, at least prices aren’t in free fall anymore. They have stabilized for the moment ahead of the meeting. The benchmark U.S. crude, West Texas Intermediate, was up 84 cents, or 2%, at $40.63 a barrel in New York, while the international benchmark, Brent crude,was up 91 cents, or 2.1%, at $42.93 a barrel in London.
The Doha meeting is expected to draw ministers from members and nonmembers of the Organization of Petroleum Exporting Countries. The meeting comes after price dips that sent oil prices plummeting, an apparent move by low-cost producers like those in the Middle East to drive out some of the higher-cost producers, those in the U.S. and Canada, in a bid to boost prices.
The strategy appears to be working, Hirs says. Some 1,200 rigs are sidelined in the U.S. with hundreds of thousands of workers idled.
