OPEC And Russia Fail To Stabilise Oil Output 

Fortunately oil is rather less important as a driver of the global economy than it used to be: everyone is becoming more sparing, more parsimonious, in their use of the stuff. The oil producing nations thus have less power over the rest of us than they did when we were more dependent upon them. And it’s that lack of power that has led to the failure of the OPEC plus Russia talks over the weekend in Doha. If oil was still under supplied, or in tight supply, then those producers would be able to reach agreement upon how to limit output and thus raise prices. It’s the very fact that the world is currently awash in oil that makes the cartel’s task so much harder. This is always true of cartels by the way: when there is over supply is when interests diverge and agreement becomes that much more difficult. 

A meeting of oil-rich countries in Qatar that had been expected to boost crude prices by freezing production fell apart Sunday as Iran stayed home and vowed to increase its output despite threats by Saudi Arabia.

** There’s a specific cause here but that is just a specific example of  this much more general problem: 

The meeting in Qatar on Sunday effectively pushed a reset button on the crude markets, putting the situation back to where the market was before hopes of producer discipline were first raised.

What happens now is that the market will have to continue along its previous path of re-balancing, without any assistance from the Organization of the Petroleum Exporting Countries (OPEC) or erstwhile ally Russia.

Brent crude fell nearly 7 percent in early trade in Asia before partly recovering to be down around 4 percent.

** The specific problem is the position of Iran:

A major stumbling block in the talks appears to have been pressure from Saudi Arabia for Iran to participate in the freeze, a measure to address the current global oversupply of oil. The Iranians, who are rapidly increasing production after the end of most sanctions over their nuclear program, have refused to cap production at current low levels.

The inability of the other oil producers to even agree on a loose commitment to freeze output for now says a lot .With this now seemingly off the table, at least until the next OPEC meeting in June and probably beyond, it is quite struggle  to see what could continue to support oil prices at this levels, even taking into consideration the considerable sell-off overnight. Declining U.S. production may help support prices to an extent but when you factor in Iran’s intention to return to pre-sanction levels, this more than offsets any reduction.