On Tuesday morning, oil watchers everywhere held their collective breath. Reports were circulating that Saudi Arabia was meeting Russia in Qatar, in the first co-ordinated move to cap production since the collapse in oil prices began in mid-2014. When markets opened in London, Brent crude had already climbed above $35 on expectations that Saudi's oil minister, Ali al-Naimi, would emerge with a substantive agreement.
Any optimism was quickly dashed, despite the two largest oil producers' agreement to freeze output at January production levels. Traders were disappointed that the deal was only a freeze in production, not a cut, and viewed the deal's requirement for other producers to agree to a cap as a diplomatic bridge too far, which helped send the oil price back down to $32.
It was then announced that Eulogio del Pino, oil minister for the increasingly desperate Venezuela and the man who brokered the Saudi-Russian accord, was off to Tehran to sign up Iran and Iraq. Yet even before he could cross the Gulf, hopes that he could convince a newly sanction-free Iran to cap production had faded.
"Asking Iran to freeze its oil production level is illogical," the country's Opec envoy, Mehdi Asali, reportedly told the Shargh newspaper, shortly after the Doha meeting. "When Iran was under sanctions, some countries raised their output and they caused the drop in the oil price. How can they expect Iran to co-operate now and pay the price?"
Indeed, Deutsche Bank analysts were quick to point out that the initial meeting's participants (which also included Qatar) "weren't expected to raise production materially in any case". For the agreement to "carry more weight", and in the absence of Iranian co-operation, Deutsche thinks all Opec members would need to hold production flat to have any impact on wider global production.
The news of the diplomatic wrangle came as Horse Hill Developments - the group behind the 'Gatwick gusher' discovery in the Weald Basin in Sussex - announced it had conducted a successful flow test at the HH-1 well. Shares in several of the group's Aim-traded co-owners leapt, including those of UK Oil & Gas (UKOG), Solo Oil (SOLO) and Alba Mineral Resources (ALBA). While the route to commercialisation remains long and obstacle-strewn, the flow test gives added credence to Schlumberger's recent assessment that UKOG's Weald acreage could hold 10.9bn barrels of oil. Not that greater oil supply is what financial markets are currently crying out for, mind.
