Amid Rumors of Production Freeze, OPEC No Longer Holds Sway Over Oil Prices

Amid Rumors of Production Freeze, OPEC No Longer Holds Sway Over Oil Prices
An Iranian oil worker at a refinery south of Tehran, Dec. 22, 2014 (AP photo by Vahid Salemi).

Since August, there have been growing rumors about an oil production freeze by major oil producers. The deal might be concluded on the sidelines of the International Energy Forum in Algeria from Sept. 26 to 28, where the Organization of Petroleum Exporting Countries (OPEC) will hold an informal gathering along with other producer countries, such as Russia. Seasoned oil market watchers will have a strong feeling of déjà vu.

Back in April, members of OPEC and Russia failed to hammer out an agreement to limit oil production at a meeting in Doha. The talks collapsed at the 11th hour after Saudi Arabia refused to sign a deal that did not also apply to Iran. Tehran had stated months in advance that it would not participate in a freeze at January production levels, arguing it needed to recapture market share lost while it was under international sanctions.

Many market observers have interpreted recent statements from high-level OPEC officials as evidence of more willingness to freeze production. At the recent G-20 summit in China, Saudi Arabia and Russia, the world’s two largest oil producers, even signed a joint agreement to establish a “working group” to find ways to minimize price volatility in the market. Talk is cheap, of course, but also useful, as it often ratchets up oil prices. Sure enough, prices rallied more than 8 percent in August on speculation of a possible output freeze. But if not followed up by action, the effects of vague bluffs will begin to wear off.

Keep reading for free!

Get instant access to the rest of this article by submitting your email address below. You'll also get access to three articles of your choice each month and our free newsletter:

Or, Subscribe now to get full access.

Already a subscriber? Log in here .

What you’ll get with an All-Access subscription to World Politics Review:

A WPR subscription is like no other resource — it’s like having a personal curator and expert analyst of global affairs news. Subscribe now, and you’ll get:

  • Immediate and instant access to the full searchable library of tens of thousands of articles.
  • Daily articles with original analysis, written by leading topic experts, delivered to you every weekday.
  • Regular in-depth articles with deep dives into important issues and countries.
  • The Daily Review email, with our take on the day’s most important news, the latest WPR analysis, what’s on our radar, and more.
  • The Weekly Review email, with quick summaries of the week’s most important coverage, and what’s to come.
  • Completely ad-free reading.

And all of this is available to you when you subscribe today.

More World Politics Review