No Deal to Cut Oil Production

Oil producers failed to reach agreement over the weekend on production limits that would help raise petroleum prices. The lack of progress prompted a 5% drop in benchmark crude prices.

The meeting in Qatar involved most members of the Organization of the Petroleum Exporting Countries and other exporters, including Russia. Iran, which has been eager to hike since sanctions were lifted earlier this year, did not participate.

Saudi Arabia, OPEC’s largest producer, reiterated its willingness to cap production if the other cartel members do the same. But attendees agreed only that they need more time to contemplate a production freeze. OPEC’s next scheduling meeting is in June.

In the meantime, average retail gasoline prices in the U.S. begin this week at $2.11 per gallon, according to the AAA Daily Fuel Gauge Report. Prices crept above $2 in early April and are likely to fluctuate into summer. But AAA say the market’s “extreme oversupply” makes it unlikely that an oil production freeze will have a lasting impact on fuel prices for many months.

Oil producers are being economically squeezed by the market’s low prices. But they are reluctant to cut production—and thereby sacrifice even more short-term income—in hopes of improving prices over the next several months.

Analysts note that OPEC’s members have rarely abided by their own voluntary quotas even when oil prices are high. Skeptics question how long exporters would honor production caps if the limits are successful in boosting prices.