By Pratap John/Chief Business Reporter
Nations representing more than 70% of the world’s oil production are gathering in Doha today to discuss freezing their output at January levels and try price stability amid clouds of uncertainty looming over global economy.
In its recent bi-annual survey, the International Monetary Fund (IMF) estimated the global economy to grow by 3.2% in 2016, down from the 3.4% forecast made in January.
The IMF cited the loss of growth momentum in advanced economies, the perception of monetary policy impotence, the turbulence in financial markets and political and natural forces as reasons behind the downgrade.
In view of the challenging global economic conditions, the IMF forecast oil price of $34.8 a barrel in 2016. This, according to QNB, seems to be “too pessimistic”.
The IMF forecast was presumably based on futures prices, which are quite volatile and
move in line with spot prices.
Indeed, the futures market has moved quite aggressively since the IMF wrote the report, and now points to an average oil price of $42 a barrel in 2016.
This is close to QNB’s forecast of $40.8, which combines demand and supply analysis together with the information contained in consensus forecasts and futures prices.
The Paris-based International Energy Agency, an autonomous intergovernmental organisation, in a report on April 16 said the global oil demand will grow by 1.2mn barrels per day (bpd), mainly driven by India, which IEA estimates, can replace China as the main engine of global demand growth.
Some 40 traders and analysts surveyed by Bloomberg recently were evenly split on whether there would be a deal in Doha today.
While Russia’s energy ministry is “optimistic” and Qatar’s has a “positive feeling”, Saudi Arabia’s deputy crown prince, Prince Mohamed bin Salman, said in an interview with Bloomberg on Thursday that the kingdom won’t restrain its oil production unless other producers, including Iran, agree to freeze output.
Brent crude futures, which sank to a 12-year low in January, have climbed nearly 30% since Saudi Arabia, Russia, Qatar and Venezuela reached a preliminary agreement to freeze output in February.
Russia has said it sees a deal to freeze oil output as possible when it meets other producers, regardless of whether Iran - which has said it plan to boost output - joins the deal.
An agreement to “restore stability” to the global oil market was “imminent” as the growing number of oil producers who have officially confirmed participation in today’s oil producers meeting in Doha “has generated a positive feeling”, Qatar’s Ministry of Energy and Industry said at the weekend.
Doha’s decision to host the high-level ministerial meeting on April 17 follows discussions among Saudi Arabia, Qatar, Venezuela and Russia on proposals to freeze production.
The gathering in Doha will comprise both Opec and non-Opec producers. Qatar holds Opec’s rotating presidency this year.
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