Oil price slumped on Monday after majority output countries failed to negotiate a curb on their production.
Oil price have rallied over 50% from a 13-year low in February 2016 on expectations that majority output countries including Russia and Saudi Arabia would make an agreement to freeze their production. While global output continues to exceed demand, some investors hoped a production freeze would lead to an output cut in the future.
However, Russia and members of the Organization of the Petroleum Exporting Countries failed to reach an agreement on Sunday, and oil prices slumped after the news.
“The main message is that OPEC is not united and, in particular, there is a big divide between Saudi Arabia and Iran,” Kevin Norrish, the head of commodities research for Barclays, said in a telephone interview on Monday. “The fact that we got nothing at all,” he said, “was not a likely outcome for most people going into this meeting.”
Some analysts believe production declines in the U.S. and other regions mean that the impact of fail to freeze oil production might be limited.
“The initial post-Doha reaction will likely see an initial leg lower, but a sentiment-driven pullback should find support near the mid-$30 a barrel range… given an otherwise improving market balance,” said Helima Croft, head of commodity strategy at RBC Capital Markets.
Other Analysts think there will be the potential for several OPEC nations to increase their production, including Saudi Arabia, Iran and Libya, driving oil prices keep falling.
“If Saudi Arabia were to lift production from 10.2 million barrels a day currently to above 11 million barrels as threatened, (along with no restraint from other members), rebalancing could be pushed all the way into 2018,” Morgan Stanley said.