More Setbacks for Production Freeze/Cut Proponents, No Progress Expected for This Month

Carlos Pareja, oil minister for Ecuador, said the gathering may have pushed for output cuts

Another day, another setback in the quest of members of the Organization of the Petroleum Exporting Countries (OPEC) and non-members to reach a production freeze deal, this time in the form of a postponement of a gathering of Latin American producers scheduled for last Friday in Quito, Ecuador.

Carlos Pareja, oil minister for Ecuador, said the gathering may have pushed for output cuts, but that this would have conflicted with Saudi Arabia's tentative endorsement of a freeze but not reductions.

The meeting may be rescheduled for late March or early April.

Meanwhile, OPEC delegates last week said that Iran's determination to regain market share makes it unlikely that the highly-anticipated meeting between Saudi, Russia, Venezuela, and Qatar to discuss a freeze will take place in Russia on March 20.

Gal Luft, senior adviser to the United States Energy Security Council, doubts the meeting will be productive even if it does happen:  "Saudis want the price of oil to be low so that they can knock out the Americans," she told CNBC, adding, "The Russians want it to be high; I don't see that there is a middle ground between those who want high and those who want lows."

Another OPEC delegate's contention that Gulf members prefer meeting in the first half of April, in Doha or another Gulf city, has reportedly been dismissed by other delegates, prompting Giovanni Staunovo, an analyst at UBS Group AG, to remark, "It's funny to hear almost each day the different dates, different locations or the lack of invitation for this producer meeting."

Staunovo then reiterated the central argument posited by critics of the mercurial meeting movement: "Talking about the freeze has been supporting prices, but talk is cheap: even if a freeze is agreed, it won't eliminate near-term global oversupply."

David Hufton, chief executive officer of PVM Group, agrees: "The meeting may not go ahead, there is the probability it will be inconclusive if it does go ahead and, whatever is agreed if there is an agreement, is unlikely to impress the market."

Last week, Fereidun Fesharaki, founder and chairman of Facts Global Energy, put the entire issue into perspective when he said that no cuts from OPEC members will occur until they see production declines in the United States and other key countries.