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Iran No-Show Causes Breakdown of Major OPEC Production Deal

Thursday, April 21, 2016

Despite efforts to reach a deal for a worldwide supply cap, the absence of a key country at a recent OPEC meeting created a meltdown in negotiations, causing the price of oil to remain on the low end.

All parties were on board to support the deal, which would create a worldwide output freeze, but the absence of Iran at the talks caused a standstill, says The New York Times. The country has been very hesitant to the idea of a capping off of their production, stating that they instead want to increase their oil exports now that sanctions that previously prohibited them from selling on the global market have been lifted.

Although Iran’s absence from the meeting may not seem like a game changer, it ended up being the defining characteristic that squashed any potential deal. As one of the world’s leading oil producers, the representatives from Saudi Arabia insisted that every entity that the Organization of Petroleum Exporting Countries includes be in attendance and participate in the agreement. When that didn’t occur, the deal collapsed.

The fallout of the deal has had a worldwide effect. Crude oil futures fell in New York to as low as $39.78 a barrel, while the price of Brent crude oil fell as much as 7 percent, settling at $41.96 per barrel. Further issues loom large as many major worldwide oil producers have vowed not to cut their oil output unless all other member nations agree to do the same.

It is unclear as to when the group will meet again, meaning that there will be an undetermined time until the long-lasting price collapse has any hope of being reversed.

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