Oil prices look likely to sink after a key meeting between oil-producing nations failed to agree on any production limits.
Negotiations between OPEC (Organisation of the Petreoleum Exporting Countries) and other oil producers ended in criticism and infighting. Saudi Arabia and other Gulf nations reportedly would not agree to any deal unless all OPEC members joined in, including Iran. Iran wasn't present at the meeting.
"Given the expectations ahead of Doha, the failure to reach a freeze agreement is likely to cause an oil market selloff. The fact that Saudi Arabia seems to have blocked the deal is an indicator of how much of its oil policy is being driven by the ongoing geopolitical conflict with Iran," Jason Bordoff, director of the Center on Global Energy Policy at Columbia University, told Bloomberg.
"If all major producers don't freeze production, we will not freeze production," Saudi Arabia's Deputy Crown Prince Mohammed bin Salman said in an interview on April 14. "If we don't freeze, then we will sell at any opportunity we get."
Saudi Arabia and Russia, two of the world's top three producers had agreed to freeze production at January levels in February, but some media reports suggest both countries were still pumping oil in February at levels above those targets.
16 nations had gathered in Doha in a bid to stabilise oil prices amid huge volatility and sliding prices. Many countries, including Venezuela, depend heavily on oil for income – and the current low oil prices could lead to political instability – showing why these countries need higher oil prices.
Bloomberg currently has Brent Crude Oil down 1.7% to US$43.10 a barrel, while West Texas Intermediate (WTI) oil is at US$40.36 a barrel, but prices could well sink into the US$30 range again.
Australia's oil and gas producers including the likes of BHP Billiton Limited (ASX: BHP), Woodside Petroleum Limited (ASX: WPL), Santos Ltd (ASX: STO) and Origin Energy Limited (ASX: ORG) could see their share price hit today in response.
Foolish takeaway
Where the oil price goes from here is highly uncertain. There is still a massive global oversupply that will take time to work its way through the market. If prices do rise, the constant risk of US shale oil producers restarting production remains.
