Investing.com - Oil prices pared gains as a surprise meeting between top oil exporters resulted in only a tentative agreement to freeze production and market experts expressed doubts on exporters’ commitment to take action.
The Saudi, Russian Qatari and Venezuelan energy ministers announced a proposal to freeze production at January levels in an attempt to stabilize markets that have seen crude hit its lowest levels in more than a decade.
News of the previously undisclosed meeting pushed Brent oil to an intraday high of $35.55 per barrel, though gains were trimmed after details were released.
Crude oil for delivery in March on the New York Mercantile Exchange rose 54 cents, or 1.89%, to trade at $29.98 by 12:58GMT, or 7:58AM ET.
The agreement to freeze production between the four ministers is contingent upon other oil producers joining the initiative. Venezuelan oil minister Euglogio del Pino announced that further talks would take place with Iran and Iraq in Tehran on Wednesday.
Nonetheless, experts were reluctant to believe that talks could lead to a production cut despite the nearly 70% plunge in oil futures since September 2014.
“The producing countries that matter most in the oil market right now are Saudi Arabia, Russia, and Iran,” Ellen R. Wald, professor of Middle East history and policy at Jacksonville University, explained. “None of these producers have any incentive to cut production, which is why news of potential production cuts is primarily wishful thinking,” she pointed out.
Along these lines World First chief economist Jeremy Cook noted that Saudi Arabia has long insisted that it would not cut production unless non-OPEC members did so as well. “The Kingdom still wishes to crush shale operators after all,” Cook said.
Energy Aspects analyst Dominic Haywood also noted that the freeze itself would have little effect on current market prices. “You've still got global inventory builds which are going to weigh on prices. So whilst it's a positive step, I don't think it will have a huge impact on supply/demand balances, simply because we were oversupplied in January anyway,” Haywood told Bloomberg.
Wald added to her skepticism citing the fact that although the Saudi Arabian oil minister “has been very clear that he is willing to discuss market conditions and production cuts with major non-OPEC producers –like Russia– for some time. But remember, discussion does not mean action.”