Ahead of the doomed Doha talks last weekend, Russia and Saudi Arabia said they were willing to discuss freezing oil output, but less than a week later both have threatened to ramp up production. On Friday, the head of the Oil Industry and Markets Division at the International Energy Agency (IEA) told reporters that he believed both producers will continue to “pump as much oil as possible.”
“In the post-Doha world, when we’re still in what is essentially a free market for oil, they (the Russians) will pump as much oil out as the market will absorb and the Saudis have said much the same thing,” the IEA’s Neil Atkinson told reporters.”
“We’re back to where we were before Doha where people produce what they can, sell what they can for whatever price they can achieve and the market takes care of the surpluses in time.”
Atkinson noted that “as far as the Russians are concerned, even in the run-up to Doha when they were going to be party to an agreement to freeze production, they were actually pumping up production anyway.”
Atkinson’s comments come less than a week after the anticlimax of talks between OPEC and non-OPEC producers in Doha last Sunday, at which hopes of a freeze of oil production levels were dashed. OPEC leader Saudi Arabia said it would not freeze output unless regional rival Iran did the same but Iran refused as it is keen to get its own oil industry back on track after years of economic sanctions.
With tensions between the OPEC members rising, oil analysts have speculated on what could happen at the next meeting of the 13-country group on June 2.
OPEC officials said on Thursday that they might discuss an oil production freeze again when the group meets then, but, once bitten and twice shy, oil markets failed to react much to those comments following the failure of talks at Doha. What’s more, just earlier in the week, Saudi Arabia, Iran and non-OPEC producer Russia all threatened to ramp up production.
Atkinson noted that Saudi Arabia had spare production capacity (of up to 2 million barrels a day) as well a couple of other Middle Eastern producers such as Kuwait and the UAE but that “apart from that there is no spare production capacity essentially anywhere in the world.”