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How the Crude Oil Market Could React to the Doha Oil Producers Meeting

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Oil producers meeting

A meeting of major oil producers is scheduled in Doha, Qatar, for April 17, 2016, and is meant to support crude oil prices. The meeting will focus on freezing crude oil production to help balance the oil supply-demand gap. Fifteen OPEC (Organization of the Petroleum Exporting Countries) and non-OPEC producers accounting for about 73% of the global crude oil production plan to support this initiative. Notably, the meeting was initially scheduled for March 2016, but the delays due to scheduling difficulties led to further rises in crude oil price volatility.

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Oil producers meeting on February 2016 

On February 16, Russia, Saudi Arabia, Venezuela, and Qatar decided to freeze crude oil production at January 2016 levels. (To learn more about the historic deal, check out “Why Crude Oil Prices Fell despite the OPEC and Non-OPEC Deal.” You might also read “Why OPEC’s Crude Oil Production Fell in February 2016.”) While OPEC’s secretary general on March 21, 2016, reported that Iran may join the oil producer’s initiative to freeze production, Iran may wait to join this initiative until it has increased its exports to pre-sanction levels.

Rising demand, weaker US dollar

Rising gasoline demand and the weaker US dollar has also supported oil prices. Slowing global crude oil production and US production has already led to an uptick in oil prices by almost 40%. This suggests that the impending oil producers’ meeting might support oil prices marginally, but oil prices could rally even more if Iran scales back its intentions of ramping up production. OPEC sources say that the meeting will likely see a moderate rally in oil prices, in any case.

The volatility in crude oil prices affects upstream players like Denbury Resources (DNR), Carrizo Oil & Gas (CRZO), W&T Offshore (WTI), Cobalt International Energy (CIE), and Goodrich Petroleum (GDP). Price volatility also affects ETFs and ETNs like the ProShares Ultra Bloomberg Crude Oil ETF (UCO), the Vanguard Energy ETF (VDE), and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO).

For ongoing analysis, keep checking in with Market Realist’s Energy and Power page.

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