Saudi Arabia: OPEC Emergency Meeting In April
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Summary
A Saudi source confirms emergency meeting.
15 OPEC and non-OPEC producers to attend.
The Iran “problem” appears to be solved.
Producers’ talk can support prices.
They may even try for a cut to get relief.
News
Oil producers kicked their freeze talk up a notch further. A Saudi source said it fully supports an emergency meeting for oil producers in the Qatari capital, Doha, in April. “Since Russia and other countries agree on having an emergency meeting for oil producers in Doha on April 17, Saudi Arabia fully supports this initiative,” the source said.
Crude futures prices rose by $2.12/barrel, almost 6%. The Fed’s decision to pass on another rise in rates provided another push higher.
Some 15 oil-producing nations representing about 73 percent of world output have agreed to take part, according to a statement from Qatar, which is the head of OPEC. “The continuous efforts of the Qatari government have been instrumental in promoting dialogue among all oil producers to support the Doha initiative, helping the stabilization of (the) oil market to the interest of all,” al-Sada said in the statement.
Tehran said again this weekend it wouldn’t participate in any production freeze agreement until it is pumping four million barrels per day. Russia’s Energy Minister Alexander Novak said he shared the view that Iran is in a “special situation” after years of sanctions, according to Reuters.
Since its low, the OPEC Reference Price has rebounded by 50%. The gain has been relatively steady since the freeze announcement in mid-February.
Interpretation
Comparing Saudi Arabia’s statements in late 2014 and throughout 2015 to those over the past month, there has been a meaningful change. In the week following the freeze announcement, it became transparently clear that even the Saudis did not expect the market reaction that had followed, nor for oil prices to unravel as much as they have.
The 2016 Saudi budget assumes an average oil price just above $60. They have been bleeding $20 billion per month. They cannot possibly believe that this has been worth the small increase in market share they gained.
If other producers can collectively manage a cut of one million barrels per day, perhaps they will agree to a small 250,000 b/d cut. Together, they could get the price above $50/bbl, maybe even to $60/bbl.
The problem with Iran not participating seems to be understood due to the cut forced on them by the sanctions. The Saudis can agree to a small cut and save face.
The eventual response by the U.S. oil shale industry will take time, and they can deal with that in due course. Right now, they need relief from the bloodbath.
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