(MENAFN- The Peninsula) Opec";s announced plans to hold a meeting late next month in Algeria has refueled speculation that major oil producers could announce moves to stabilise oil prices. Qatar";s Minister of Energy and Industry H E Dr Mohammed bin Saleh Al Sada";s Vienna statement that Opec will meet in Algeria to discuss the output cap, has already stirred up the market.
Dr Al Sada";s statement, as the president of Opec, had an instant positive hit on the market as crude-oil futures rallied . Light, sweet crude for September delivery rose 59 cents, or 1.4 percent, to $42.39 a barrel, while October Brent on London";s ICE Futures exchange gained 55 cents, or 1.2 percent, to $44.82 a barrel. The confirmation from Saudi Oil Minister Khalid Al Falih gave added credibility to the idea that Opec will consider action of oil cap. On Thursday, US West Texas Intermediate (WTI) futures soared as much as 5 percent in trading after his statement, and later settled at $43.49 per barrel, up 4.3 percent. The FTSE 100 smashed 6,900 for the first time this year in Thursday";s afternoon trade, enjoying its highest close in more than 14 months, after Al Falih";s statement.
But just because Opec is holding an informal meeting, doesn";t mean the divided oil cartel will be able to agree on production caps, let alone production cuts. Remember, Opec and non-Opec producers held marathon production freeze talks in Doha in April, but ultimately failed to agree on anything.
The spotlight is on Iran. Opec-member Iran has been the main opponent of a freeze as it looks to raise its output to levels seen before imposition of now-ended Western sanctions. A decision on putting a cap on the global oil production will depend on Iran";s response to the idea of the output freeze meet in Algeria.
Though Venezuela, which depends heavily on oil revenues, happened to be the rallying force behind the oil cartel";s second round of production cap meeting, major oil producing countries are also keen on a market recovery. These countries that rely on oil badly want to keep their economies afloat. Venezuela could run out of cash within a year. Oil giant Saudi Arabia, the powerful leader of Opec, has been forced to usher in severe budget cuts. Qatar is estimated to run a budget deficit of $8bn, equivalent to 5 percent of its GDP in 2016. Russia";s economy has been hit by cheap oil and sanctions from the West. Russia has even cut its defense spending despite tensions with the West.
It is estimated that in the Middle East and North Africa as a whole, oil exporters lost more than $340bn of revenues last year because of low crude prices, equivalent to 20 percent of their combined GDP. The region is expected to brace for losses of around $500bn this year.