Oil Output Freeze By Saudi, Russia To Have ‘Miniscule’ Impact On Supply Glut
The move had no impact on UAE markets Wednesday
The agreement to freeze Crude Oil production at January levels by Saudi Arabia and Russia Tuesday will have a negligible impact on oversupply in the market, an expert said.
The Crude Oil producers announced the decision during a meeting in Doha but said the deal was dependent on other exporters’ participation.
Brent Crude jumped by 6.5% ahead of the agreement Tuesday, but later dropped by 3.6%. It is currently at around 32 bbl.
ForexTime research analyst Lukman Otunuga said the agreement left investors empty handed.
“Not only has production been frozen at January 2016 record levels, which will have a minuscule impact on the excessive oversupply, the meaningless freeze is only valid on the premise of other producers joining in,” he said.
Oil ministers from the OPEC (Organisation of Petroleum Exporting Countries) held discussions in Tehran Wednesday to talk about a possible production freeze between global Oil producers. Tehran was polite but did not agree to cut production.
“The obstacles for the pending production freeze are noticeably overwhelming as Iran remains on a quest to reclaim lost market share, while Iraq’s production continues to soar as it incessantly pumps to generate revenue to recover from years of conflict,” said Mr. Otunuga.
“OPEC’s greed has played a part in this painful decline and the visible conflict of interest between OPEC and non-OPEC members suggests that low oil prices may be the theme for an extended period,” he added.
Markets across the world reacted with confusion to the news, added FXTM’s chief market analyst for the United Arab Emirates(UAE) market Jameel Ahmad.
“The UAE markets have acted like many other markets in terms of reacting to the news and by this I mean responding with confusion,” he said.
“A production “freeze” means absolutely nothing for those looking for an Crude Oil price rebound, because it basically indicates to onlookers that they are willing to leave output around record levels and also leave the aggressive oversupply in the markets as it currently stands,” he added.