The breakdown of talks aimed at stabilizing oil production may cut crude oil prices and stem the tide of rising gas prices in the U.S.
Oil exporting nations, including non-OPEC Russia, gathered in Doha to ratify a deal to stabilize output at January levels until October. However, despite the fact that the outline of the deal had been approved by negotiators in advance, it still fell apart.
The collapse of the talks, which were aimed at slowing down oil production around the globe, renewed the downward pressure on the price of crude oil, which eased the upward pressure on the price of gasoline across the U.S. despite rising demand.
The deal crumbled when OPEC heavyweight Saudi Arabia demanded that Iran join in despite its repeated assertions it would not do so until it had reached pre-sanctions levels of output, according to Reuters.
“Saudi Arabia intentionally torpedoed the agreement and was willing to accept its failure. This has severely damaged the credibility of oil producers in general and of OPEC in particular,” Commerzbank said in a note to investors quoted in the Reuters dispatch.
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The Kingdom of Saudi Arabia has been deeply unsettled by what it sees as the increasing influence of Iran, its principal rival for power in the Middle East.
Differences between Saudi Arabia and Iran, which appear insoluble, sent cur into oil prices as trading opened Monday. The results of the meeting also reflected the reluctance of many countries facing economic difficulties, such as Venezuela, to reduce production.
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For GasBuddy, which tracks gasoline prices around the U.S, suggested the lack of an agreement in Doha will reduce the price of crude oil by between $3 and $7 per barrel in the short term. “This will could help stop any speculative drive on the gasoline side, especially since supply appears better than last year at this time,” Gas Buddy noted.
Meanwhile, AAA’s Gas Gauge showed the average price of gallon of gasoline across the U.S. was $2.11 per gallon or about 7 cents per gallon higher than it was a week ago and 14 cents per gallon higher than it was a month ago. However, the current price is still substantially below the $2.44 per gallon drivers were paying in April, 2015, according to AAA’s figures.
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The Lundberg report noted recently that gasoline prices have fallen even though demand for gasoline in the U.S. had increased by 2.9% in 2015.