Crude oil prices were trading weaker at week’s end with higher-than-average volatility as investors positioned themselves ahead of a meeting between major producers, who are scheduled to discuss a potential production freeze this weekend.
The June crude oil futures contract looked as if traders were going to go into the meeting with an upside bias, however, sellers came in, triggering more than a percentage point after a report that Iran’s oil minister Bijan Zanganeh won’t attend the oil producers’ summit Sunday in Doha, Qatar.
Scheduled to meet in Doha on April 17 are more than a dozen OPEC and Non-OPEC producers, led by Saudi Arabia and Russia. They are expected to discuss measures to limit production in a bid to support prices. Many analysts, however, are skeptical about the outcome of the talks and this is being reflected in the price action.
In general, industry analysts believe that if an agreement to freeze production is reached, it will probably not include any concrete figures or obligations. Nothing will likely be at risk in the event a producer decides at some time in the future not to comply with the output cap. This being said, the agreement will probably have no lasting effect on the current situation in the oil market.
If an agreement is reached we are likely to see a two-side reaction in the market over the short-run. Most likely, there will be a spike to the upside because of short-covering then the market will…