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Doha disagreement delineates Saudi-Iranian rivalry

Monday, April 18, 2016

Significance

Many producers, facing budgetary pressures because of low oil prices, support output restraint, but they need to act in concert. Russia and Saudi Arabia have offered a freeze rather than cuts, and Riyadh is not prepared to adopt any stance that provides a comparative advantage to regional rival Iran.

Impacts

  • Prices could rise somewhat in the short term due to the drop in Kuwaiti production caused by industrial action.
  • Another factor pushing up oil prices could be any further upward revision to the expected contraction in US crude output.
  • Downside risks dominate in the long run, owing to producers' inaction, record inventories and the return of interrupted supplies.
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