By Amanda Cooper
LONDON (Reuters) – Oil prices slipped off session highs on Tuesday after four of the world's largest producers agreed to freeze output at January levels if other major exporters joined the pact, dashing hopes among the price bulls for an outright cut to supply.
Qatari energy minister Mohammad bin Saleh al-Sada told a news conference that the step would assist to stabilize the oil market, which has experienced price declines not seen since the early 2000s because of the pace at which supply has outstripped demand.
p>Analysts said while the decision is a step in the right direction to bring supply & demand back into balance, global inventories remain near record levels & are likely to dampen any price rallies.
"I don't think it will have a huge impact on supply/demand balances, simply because we were oversupplied in January anyway. We’re just even more oversupplied now," Energy Aspects analyst Dominic Haywood.
"So in that regard it’s not huge yet it’s a step in the right direction. But you’ve still received a huge amount of inventory that is going to weigh on the price for a long time & we need to clear that, because it’s going to kill any rally."
The oil ministers of Russia & Venezuela attended the meeting in the Qatari capital, together with Saudi oil minister Ali al-Naimi, who said the group's next steps would be assessed over the coming months.
Brent crude futures <LCOc1> were up 53 cents at $33.92 a barrel by 1135 GMT, having fallen from an earlier peak of $35.55, the highest price since Feb. 4.
U.S. crude futures <CLc1> were up 33 cents at $29.77, off the day's high of $31.53.
Oil prices have fallen by more than 70 percent in the past 20 months, driven down by near-record production both from OPEC members & other producers, such as Russia.
The drop in the oil price has eroded the finances of even the more affluent oil-producing nations, forcing governments to cut spending, increase deficit forecasts, borrow more & push through politically unpopular reforms.
Sources familiar with Iranian thinking on supply said Tehran would be willing to consider a freeze once its output had reached pre-sanctions levels.
"The output freeze is disappointing because it's not an outright cut & with Iran not a part of the meeting it’s still a bit far-fetched to think this is a precursor to a future cut. Iran’s absence from the meeting means overall OPEC output should still rise," CMC Markets analyst Jasper Lawler said in a note.
(Additional reporting by Osamu Tsukimori & Aaron Sheldrick; Editing by David Goodman, Greg Mahlich)
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