Brent: In Anticipation of the Meeting in Doha
In anticipation of the outcome of the meeting of the leading oil producing countries in Doha this weekend, volatility in the oil market has been high in the last two days. The price of crude oil Brent is in the narrow range of 43.80 USD per barrel.
When in the middle of February four large oil producing countries Russia, Saudi Arabia, Qatar and Venezuela proposed to introduce restriction of oil production, the price of oil went up by 46%. A month before that the price of crude oil Brent reached 12-month lows at the level of 27.00 USD per barrel. Despite the recovery of price the oil is still below the level of 100 USD per barrel, which was achieved in June 2014.
Market participants do not have a general opinion about the agreements which will be reached at the meeting, and the future price of oil.
However, even the decision to freeze oil production at the level of January or February will be reached, high level of oil production in the world can neutralize all the efforts.
Since last June oil production in OPEC countries has been at the level of 32.4-32.6 million barrels a day and oversupply of oil will increase, especially because of the policy of Iran, as this country plans to increase oil production to the level the country had before the sanctions, which is 4 million barrels a day.
The total volume of oil in the US storages amounts to 530 billion barrels, which is the historic highs in the last 80 years. According to the data released by the US Department of Energy on Wednesday, oil inventories have grown last week (+6.634 million barrels).
Many economists and analysts believe that agreement to freeze oil production will be reached and it will provide support to oil prices. The price crude oil Brent is unlikely to rise above the level of 45.00 USD per barrel.
The main factor, which causes the decline in price, is oversupply of oil in the market. And this fact will continue to put pressure of oil prices. The reduction of oil production will significantly support oil prices. However, it seems that large investors in the oil market are not ready to do it.
