KUWAIT CITY (AFP) - Major oil producers meet this weekend to try to negotiate an output freeze to drain crude oversupply and boost prices, but doubts remain over whether Iran will join any accord.
Analysts are divided on the expected outcome of the meeting of around a dozen oil exporters, including heavyweights Saudi Arabia and Russia, in Doha on Sunday (April 17), which could send oil prices rising or crashing again.
Prices have rebounded sharply in recent weeks partly on expectations of a deal that could, in theory at least, help to reduce the glut and repair producers' battered public finances.
"The general feeling is that an agreement will be reached in Doha to freeze oil production at January's levels," said Fawad Razaqzada, analyst at brokerage firm City Index.
That would "likely give prices a further short-term boost." Complicating prospects of a deal, however, OPEC kingpin Saudi Arabia has insisted it will not join an output freeze unless its regional rival Iran does so.
Tehran, which is emerging from nuclear-related Western sanctions, will be seeking a waiver until its production reaches its pre-embargo levels.
"We don't see Saudi Arabia freezing production and ... accommodating significant production rises by other producers," Fahad al-Turki, head of research at Saudi Jadwa Investment, told AFP.
If a substantive agreement is struck in Doha, however, that would help to build trust between key producers and pave the way for production cuts in the future, Turki said.
Qatar said Thursday that there was an "atmosphere of optimism" that a deal would be struck, adding that the number of countries due to attend had risen.
Last month, Qatar said 12 nations including itself would be present at the talks, but it did not confirm if Iran was among them.
The Doha meeting is a follow-up to talks in February between OPEC members Saudi Arabia, Qatar and Venezuela plus Russia in which they first mooted the output freeze.
The Organization of Petroleum Exporting Countries warned ahead of the Sunday talks of worsening oversupply.
Opec also trimmed its forecast for global oil demand growth this year and said it might have to lower its projection further.
A sharp rise in unconventional oil production, mainly US shale crude, and Opec's reluctance to cut output triggered a collapse in oil prices from levels above US$100 a barrel in 2014, costing exporters billions of dollars.
After hitting 13-year lows of around US$27 a barrel in February, oil prices have since rebounded to above US$40.
On Thursday, the International Energy Agency warned against over-expectation for the Doha talks, saying the meeting would have only a "limited" impact on supplies.
Jean-Francois Seznec, an oil expert at Georgetown University, believes that Iran will not be the key problem at the meeting as it is only capable of boosting output by 300,000 barrels per day (bpd) this year.
"I think the worry for the producers is not whether Iran freezes or not, but whether Russia would do so," Seznec told AFP.
Opec said on Wednesday that Iranian oil production in March was 3.3 million bpd, up from 2.9 million in January, but still short of its pre-embargo level of around 4.0 million.
Opec said its members pumped 32.25 million bpd in March - with Saudi Arabia accounting for nearly a third - up from an average of 31.85 million bpd in 2015.
"The freeze talks between Opec and non-Opec will decide how quickly markets could get balanced and by how much oil prices would rise," Abhishek Deshpande, an analyst at Natixis, told AFP.
A freeze agreement, if it includes Iran, could see "markets completely balanced" as early as in the third quarter this year, he added.
Oil brokers PVM however said in a comment this week that during the first quarter of this year, daily supply exceeded demand by 2.3 million barrels.
This has added millions of extra barrels to global strategic and commercial stocks, which will reach almost 1.5 billion barrels by the summer, it said.
"Whatever the outcome of this meeting, the price of oil will not rebound soon with a level sufficient to balance public finances of the majority of producers," said SAXO Bank analyst Christopher Dembik.
He warned oil prices could drop back to US$30-33 a barrel if producers fail to strike a deal.
One of the main OPEC goals by not cutting production was to drive high-cost supply, mainly US shale oil, out of the market.
US shale production is now sliding but the conventional producers' dilemma is that shale oil can respond quickly when prices increase.