Oil prices slide after failed output freeze deal leaves OPEC reputation in tatters

Tensions between Saudi Arabia and Iran were blamed for the failure to reach a deal

Persistently low oil prices have wreaked havoc on economies reliant on oil
Persistently low oil prices have wreaked havoc on economies reliant on oil

Oil prices were sliding on Monday morning after some of the world’s biggest oil exporting countries failed to agree on a production freeze at a meeting in Doha over the weekend.

Tensions between Saudi Arabia and Iran were blamed for the failure to reach a deal, damaging the credibility of the Organisation of Petroleum Exporting Countries and raising fears that governments could start raising production instead, forcing the oil price to new lows.

Saudi Arabia has already threatened to raise output following the failed deal.

Brent crude was down 4.32 per cent at $41.24 a barrel, while the West Texas Intermediate was down 4.53 per cent at $38.53 a barrel in the biggest one-day slide since February.

“OPEC's credibility to coordinate output is now very low,” said Peter Lee of BMI Research, a unit of rating agency Fitch. “This isn't just about oil for the Saudis. It's as much about regional politics.”

Iran said on Friday that it would not attend the meeting in Doha. The country is against a production freeze because it only started pumping oil again in January, after sanctions were lifted when it complied with a deal designed to prevent it developing nuclear weapons.

“Iran had always excluded itself from participation in a deal and it was not present at the Doha meeting,” said Colin Smith, oil and gas analyst at City stockbroker Panmure Gordon.

“The finger pointing suggests that Saudi Arabia could not bring itself to sign a deal without some sort of commitment from Iran and may have been expecting late concessions.”

Iraq’s representative told the Financial Times: “We are very very disappointed.....This will affect the [oil] price and our earnings. We wanted a deal.”

Oman’s oil minister also spoke of his disappointment about the failed agreement.

Supporters of the deal hope that by freezing production, countries will stop the oil price from reaching new historic lows. Prices have fallen more than 60 per cent from $115 in June, 2014, to around $42 a barrel at current prices.

Persistently low oil prices have wreaked havoc on economies reliant on oil.

In February, Saudi Arabia reached an agreement with Russia to freeze production but insisted that no freeze would be put in place unless other producers in the Organization of Petroleum Exporting Countries agreed to co-operate.

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