Credit Sergei Karpukhin/Reuters
LONDON — When officials from OPEC, Russia and some other oil-producing countries meet this weekend in Doha, Qatar, to discuss freezing petroleum production at current levels, the session’s significance might have more to do with style than substance.
The fact is that the two biggest players at the meeting — Saudi Arabia and Russia — are already pumping virtually flat out. They have little room to increase production even if they wanted to.
But signals the two countries have sent recently, indicating they would rather discuss cooperation than continue cutthroat competition, have buoyed oil prices well above their lows in mid-January, when the Brent crude international benchmark dipped below $30 a barrel. On Monday Brent crude was trading above $41.
Analysts, oil buyers and speculators will be watching the Doha meeting mainly to see whether the 13 members of the Organization of the Petroleum Exporting Countries and Russia show signs of being able to cooperate enough to exercise market discipline — and maybe even to cut production at some point, if necessary, to bolster oil prices.
Signs of disharmony, or a last-minute cancellation of the summit, might send oil prices plummeting yet again, and possibly stir up the broader financial market anxieties that accompanied the winter sell-off.
“A freeze is laughable, given that Russia is at a post-Soviet high and Saudi Arabia is producing 10.2 million barrels per day,” said Robert McNally, president of the Rapidan Group, an energy consultancy based in Bethesda, Md. And yet, the mere talk of a freeze, he said, “has worked spectacularly, at least initially.”
Credit Michael Stravato for The New York Times
Many analysts say that a freeze, if agreed to, would have little impact on the estimated one million or more barrels of excess oil that each day is pouring into already brimming storage tanks and tankers around the world.
Mr. McNally, who served as a White House energy adviser during the George W. Bush administration, says an output freeze would be “a very poor cousin” to some earlier efforts by oil producers to manage supply. That includes the substantial cuts by OPEC members in 2008.
This time Saudi Arabia, which would probably need to make the bulk of any OPEC cuts, has adamantly refused to do so on its own.
Mr. McNally and other analysts speculate that the oil producers hope a freeze agreement would be sufficient to shore up prices until gradually growing demand catches up with supply — which many forecasts say will happen either this year or in early 2017.
“Once we get into the summer, falling supplies will come to dominate the market,” said Richard Mallinson, an analyst at Energy Aspects, a market research firm based in London.
OPEC countries are also hoping that the price-pressured cuts in production by some energy providers, like smaller shale-oil drillers in the United States, will help reduce the surpluses. So might the eventual impact of big oil companies’ postponing hundreds of billions of dollars’ worth of projects in response to low prices.
The main goal of the Doha meeting seems to be assuring markets that countries whose economies depend on selling oil can still find ways to collaborate.
A glut of crude oil on the markets is pushing the price of oil down to levels not seen since the global financial crisis.
At least one proposed meeting has been scrubbed since Russia, Saudi Arabia and other producers agreed, at a Doha meeting in February, to consider the idea of a freeze — on the condition that other major exporters came aboard. Non-OPEC countries including Mexico, Brazil and Oman may attend this week’s meeting, and Norway may follow its tradition of sending “observers” to such gatherings.
“We don’t yet know what the freeze really means in terms of detail — how it is measured, and the duration,” said Bhushan Bahree, an analyst at the research firm IHS in Washington.
One looming question is whether some accommodation can be found to bring Iran into the fold. Iran is a member of OPEC, but it is also a sworn geopolitical enemy of Saudi Arabia.
The Iranians, whose production and exports were slashed by international sanctions over their nuclear program, are determined to regain their former share of the market now that most of those sanctions have been lifted.
Iran’s oil minister, Bijan Zanganeh, is a seasoned official who will be unlikely to agree publicly to a freeze, analysts say, but will also be wary of causing prices to collapse.
A related question is whether Saudi Arabia, hostile to growing Iranian influence in the Middle East and locked in a fierce competition with Iran and other Persian Gulf producers for customers like China and India, will accept a compromise that makes an exception for Iran.
In a recent interview with Bloomberg News, Mohammed bin Salman, the deputy crown prince and a crucial power broker in Saudi Arabia, suggested that the Saudis would not go along with a freeze without Iran’s participation.
The oil industry, with its history of booms and busts, is in a new downturn.
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And yet, there are limits to how much Iran could raise production even if it rejected a freeze.
Since the relaxing of international sanctions last autumn, Iran has increased production to slightly more than 3.2 million barrels a day from about 2.9 million. But because much of its production infrastructure is old and rickety, Iran may be unable to increase output significantly without spending time and money upgrading its oil fields.
“They have already added 300-and-some-thousand barrels, and that tells me that they have pretty much topped out for a while before they can go higher,” said Sadad al-Husseini, a former executive vice president of the Saudi national oil company, Saudi Aramco, who now runs Husseini Energy, a consulting firm based in Dhahran.
But others note that some other OPEC members with their own political and economic problems, like Libya and Iraq, might feel compelled to keep pumping at current levels or even step up production.
“If everyone produces at maximum capacity, the price is at risk of revisiting the lows seen earlier this year,” said Harry Tchilinguirian, the head of commodities strategy at BNP Paribas in London.
He and others see little chance of a strong recovery in oil prices anytime soon without significant curtailments by major oil-producing countries. And they say those reductions will not happen unless the Saudis lead the way on an agreement to cut back.
“I am not very optimistic about the proposed Doha deal nor on the producers’ ability to manage a gradual improvement in prices,” said Nordine Ait-Laoussine, a former energy minister of Algeria who now runs Nalcosa, a consulting firm based in Geneva.
“With the Saudi no-cut diktat,” Mr. Ait-Laoussine said, “I don’t see production going down in the short term. I only see it going up.”