from Bloomberg....
In less than a week, major oil-producing nations will meet in Qatar to discuss capping their output. Yet even if they decide to do that, the purpose of the meeting probably has little to do with balancing global supplies. Crude market fundamentals are set for many months to come; the oil producers are more interested in finding a way to manage financial markets' expectations, which have a greater effect on prices.
A freeze "at recent production levels would not accelerate the rebalancing of the oil market," Goldman Sachs analysts wrote in a report that argued the meeting would be more likely to lead to a price drop than a hike. And indeed, output levels are close to all-time records for the Organization of Petroleum Exporting Countries (above 33 million barrels a day) and near the historic high for Russia, a participant in the Doha meeting (above 11.2 million barrels a day).
Oil Prices
Besides, some OPEC members are increasing output ahead of the meeting. Iraq, for example, hit its production record -- 4.55 million barrels a day -- in March."
"....Persian Gulf states and Russia need to pump oil at any price because that's how they fund their budgets, so when the price is low, they need to pump more. This is how it's going to be at least for the next few years: The traditional producers are going to win back some lost market share. The biggest problem they face has nothing to do with the physical demand-supply balance of oil. They need to keep prices as high as possible, but low enough to prevent U.S. investment and output from rising again.
This is a world in which you have to convince traders that the balance is going to move this way or that, not to actually change it. That explains, at least in part, the mini-rally since the largely meaningless February agreement between two of the world's biggest producers, Russia and Saudi Arabia, as well as Qatar and Venezuela, to freeze production at January levels. The price of Brent crude is up about $10 per barrel.
Everyone, including traders, understands that such deals are iffy, that the parties won't necessarily stick to them, and that freezing production at record levels may just signify an inability to pump much more oil in the near future. Yet it's still something to trade on. If the talks in Doha on April 17 end in an agreement, even a symbolic one, that will send the market a signal to drive up the price.
Holding a meeting where production caps and cuts are discussed is one way of achieving that. News of the meeting can combine with shrinking U.S. output to produce temporary price rises.