How far will the price of oil fall?
Crude oil has jumped more than 40 per cent since mid-February when Saudi Arabia, Russia, Venezuela and Qatar first announced plans for an output freeze. While other factors have played a part in driving prices back above $40 a barrel there’s no doubt the prospect of the first global oil deal in 15 years was a key driver. As such, there is likely to be a negative price reaction when markets open on Monday. Analysts at Citi told their clients on Friday to brace for a sharp oil market decline if the Doha talks were to end with no agreement. Brent, the international oil marker, will probably retest $40 a barrel. But it is also worth remembering that a deal in Doha would not have reduced global supplies — just frozen them at high, and in some cases, record levels.
“The freeze between other producers would have made no real difference to balances as we believe, apart from Saudi Arabia, Russia and Iran are the only two countries among those involved in the freeze talks that will be able to increase production this year,” said analysts at Energy Aspects, a London-based consultancy. So the impact may not be severe. The market could also find support from Kuwait, where oil workers started strike action on Sunday. This will add to global supply disruptions, which already stand at almost 2.8m barrels a day — near a two-year high — according to Energy Aspects.