A deal to freeze oil output by OPEC and non-OPEC producers fell apart on Sunday, leading to a steep drop in oil prices towards $40 on Monday.
Below are the key facts, questions and answers about the meeting:
WHAT WERE THE DOHA TALKS TRYING TO ACHIEVE?
Some 18 oil nations including OPEC’s leader Saudi Arabia and top non-OPEC producer Russia had been expected to rubber-stamp a deal — in the making since February — to stabilize output at January levels until October 2016.
Russian oil minister Alexander Novak had said the deal would help balance supply and demand in the market by the end of 2016. Without it, the market would struggle to work through the current glut until the end of 2017, he said.
WHY DID THE TALKS FAIL?
Iran argued it could not join the freeze because it needs to regain production levels after the lifting of international sanctions. The sanctions were lifted after Iran and the group of world powers known as the P5+1 agreed on curbs to Tehran’s nuclear program.
Saudi Arabia, which had signaled it was willing to sign the deal without Iran, surprised participants last week by asking that Iran’s invitation to the Doha talks be canceled. Iran responded by saying it was happy not to attend.
On Sunday, however, Saudi Arabia came up with a second surprise by demanding that Iran join the freeze. Talks then fell apart after the communique could not be agreed.
“(Saudi oil minister Ali) Al-Naimi will have lost credibility with Russia and will have as well upset other OPEC and Gulf countries,” said Olivier Jakob, analyst from Petromatrix.
WHAT ARE THE IMPLICATIONS FOR OIL MARKETS?
The failure of talks has revived oil industry fears that major producers are going back into a battle over market share that has already driven prices to as low as $27 per barrel in January from highs around $115 in mid-2014.
Saudi Arabia’s top oil official, Deputy Crown Prince Mohammed bin Salman, threatened last week to raise output by as much as 2 million barrels per day from the current levels if the deal freeze was not reached by all members.
That would amount to more than 2 percent of global supply and significantly exacerbate the glut. Iran also wants to raise output by at least 0.5 million bpd. Iraq and Libya could also add barrels to the market.
On Monday, Brent oil prices fell to $40 per barrel before recovering to $41.65, down 3.36 percent by 1220 GMT (0720 EDT).
WHAT ARE THE IMPLICATIONS FOR THE GLOBAL ECONOMY?
Low oil prices have helped the global economy but some international financial organizations have warned that a very prolonged period of low prices could damage global growth.
Both the IMF and the U.S. Federal Reserve are increasingly impatient with the low oil price, according to Jakob.
“Concerns over financial stability in the energy sector and a further fall in drilling capex are headwinds to growth against an already fragile global economic backdrop,” said Frederic Neumann, co-head of Asian economics research at HSBC.
WHAT ARE THE POLITICAL IMPLICATIONS?
Arch-rivals Saudi Arabia and Iran have been fighting a number of proxy wars in the Middle East, including in Syria and Yemen. Russia supports its strategic ally Iran in many of its conflicts in the region.
“The meeting exposed that the heightening geopolitical tension between Saudi Arabia and Iran continues to transcend into the oil market…,” Barclays said on Monday.