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As Oil Nations Consider a Freeze, Looking for Tensions to Thaw

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LONDON — When officials from OPEC, Russia and some other oil-producing countries meet this weekend in Doha, Qatar, to discuss freezing petroleum production at current levels, the session’s significance might have more to do with style than substance.

The fact is that the two biggest players at the meeting — Saudi Arabia and Russia — are already pumping virtually flat out. They have little room to increase production even if they wanted to.

But signals the two countries have sent recently, indicating they would rather discuss cooperation than continue cutthroat competition, have buoyed oil prices well above their lows in mid-January, when the Brent crude international benchmark dipped below $30 a barrel. On Monday Brent crude was trading above $41.

Analysts, oil buyers and speculators will be watching the Doha meeting mainly to see whether the 13 members of the Organization of the Petroleum Exporting Countries and Russia show signs of being able to cooperate enough to exercise market discipline — and maybe even to cut production at some point, if necessary, to bolster oil prices.

Signs of disharmony, or a last-minute cancellation of the summit, might send oil prices plummeting yet again, and possibly stir up the broader financial market anxieties that accompanied the winter sell-off.

“A freeze is laughable, given that Russia is at a post-Soviet high and Saudi Arabia is producing 10.2 million barrels per day,” said Robert McNally, president of the Rapidan Group, an energy consultancy based in Bethesda, Md. And yet, the mere talk of a freeze, he said, “has worked spectacularly, at least initially.”

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Many analysts say that a freeze, if agreed to, would have little impact on the estimated one million or more barrels of excess oil that each day is pouring into already brimming storage tanks and tankers around the world.

Mr. McNally, who served as a White House energy adviser during the George W. Bush administration, says an output freeze would be “a very poor cousin” to some earlier efforts by oil producers to manage supply. That includes the substantial cuts by OPEC members in 2008.

This time Saudi Arabia, which would probably need to make the bulk of any OPEC cuts, has adamantly refused to do so on its own.

Mr. McNally and other analysts speculate that the oil producers hope a freeze agreement would be sufficient to shore up prices until gradually growing demand catches up with supply — which many forecasts say will happen either this year or in early 2017.

“Once we get into the summer, falling supplies will come to dominate the market,” said Richard Mallinson, an analyst at Energy Aspects, a market research firm based in London.

OPEC countries are also hoping that the price-pressured cuts in production by some energy providers, like smaller shale-oil drillers in the United States, will help reduce the surpluses. So might the eventual impact of big oil companies’ postponing hundreds of billions of dollars’ worth of projects in response to low prices.

The main goal of the Doha meeting seems to be assuring markets that countries whose economies depend on selling oil can still find ways to collaborate.


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