No-Brainer Production Freeze Ends Mindlessly
By Art Berman
The production freeze meeting in Doha was a no-brainer but it ended mindlessly with no action taken.
OPEC plus Russia and Mexico met yesterday to agree to do almost nothing by freezing production. Instead, they agreed to do absolutely nothing leaving everyone wondering why they even held the meeting.
All that they had to do was agree not to increase oil production above levels in January. They could have modified that to current levels. Probably, that would have ensured that oil prices remain near currently inflated levels that were created mostly by expectation of a production-freeze agreement to begin with.
It should have been a no-brainer because the Doha group’s production is already 130,000 barrels per day less than it was in January (Figure 1). Kuwait, Qatar, Russia, Mexico, Ecuador and Indonesia are all producing slightly more than they were in January but were prepared to go back to those levels.
Figure 1. Doha participants March vs. January 2016 crude oil production. Source: EIA and Labyrinth Consulting Services, Inc.
Iran is producing about 350,000 bpd more than in January and has stated its intent to raise output much higher. Everyone else is producing less or the same as in January.
But this has been clear for months. Iran called the idea of a production freeze “ridiculous” in February and did not even send a representative to the meeting in Doha.
So, what was the point of the meeting?
