DOHA, Qatar — Officials from 18 oil-producing nations failed on Sunday to reach a deal to freeze oil production at current levels.
The meeting of officials, representing most of the Organization of the Petroleum Exporting Countries as well as Russia, had been intended to calm the markets and convince them that the two leading oil exporters, Russia and Saudi Arabia, were cooperating. But with officials coming up short on Sunday, the meeting may end up being a blow to confidence that could send oil prices tumbling.
A sharp fall in oil prices could also feed into equity prices, which have recently tended to rise and fall along with oil prices.
Oil fell sharply in early trading on Monday in Asia, at one point dropping nearly 6 percent to fall below $38 a barrel. Asian stock markets were mixed. Japanese shares were down nearly 3 percent in morning trading, but stocks across the rest of Asia saw more modest declines. Markets in Shanghai and Hong Kong opened around 1 percent lower.
“There will be a lot of people who they have disappointed,” said Bill Farren-Price, chief executive of Petroleum Policy Intelligence, a British firm that advises hedge funds and other businesses on the oil markets. The oil exporters, he said, “raised expectations.”
A major stumbling block in the talks appears to have been pressure from Saudi Arabia for Iran to participate in the freeze, a measure to address the current global oversupply of oil. The Iranians, who are rapidly increasing production after the end of most sanctions over their nuclear program, have refused to cap production at current low levels.
The oil producers seemed to head into the meeting full of confidence that a deal to stabilize oil markets could be reached. In fact, a draft agreement calling for a freeze at January levels through October was circulated Saturday.
Talk of a potential freeze had already helped lift the oil markets from their January lows below $30 per barrel to about $43 per barrel for Brent crude. “I think at least the discussion and expectations around the Doha meeting have contributed to higher prices,” Eric Lascelles, chief economist at RBC Global Asset Management, said in an interview before the meeting.
A deal was unlikely to quickly change the amount of oil on the market because most participants in the freeze were pumping at high levels. And the failure is unlikely to have much of an impact on supply and demand balances.
What might limit the reaction is a strike on Sunday by Kuwaiti oil workers. That has cut into the country’s oil production by what appears to be a substantial amount. “You would expect the market to sell off but the downside might be limited, “ said Mr. Farren-Price, who was observing the Doha meeting.
Analysts on Sunday also raised the question of how Saudi Arabia and the other countries could have scheduled the meeting if they knew it was doomed to failure. After all, the idea was to calm the markets, not roil them.
“This implies really poor communication by the lead members of the group,” particularly Saudi Arabia and Russia, said Richard Mallinson, an oil analyst at Energy Aspects, a London-based market research firm. “Why even schedule this meeting if you did not have a compromise agreed over Iran.”
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