Oil prices have plunged more than 60 percent from their peak of $110 a barrel in June 2014. The decline came amid fears global oil production was outpacing the world's thirst for oil. With those triple-digit heights long gone, government oil and gas revenue and company profits have drastically declined, resulting in widespread layoffs, federal subsidy cuts and hundreds of billions of dollars in canceled investments. Qatar, which holds the OPEC presidency in 2016, said it summoned a meeting with major oil producers to stop the downward economic spiral. The meeting occurs Saturday in Doha.Qatar in February joined Saudi Arabia, Russia and Venezuela in a pledge to cap oil output at January levels. The announcement caught oil traders by surprise, and prices surged by nearly 50 percent after hitting a 12-year low of below $28 a barrel. The problem is that the oil freeze proposal came with a significant catch. Saudi Arabia has since clarified it won't sign any deal unless other major oil producers, including its political rival Iran, follow suit. Iran has refused to cap output until it boosts production by 1 million barrels a day to pre-sanction levels, and it's unclear whether the country will send delegates to Doha. Libya has similarly snubbed the meeting as it seeks to recover output lost during its bloody civil war.
With Iran and Libya unlikely to budge, Saudi Arabia might be pressured next week into dropping its demand that other exporters get on board, said Fadel Gheit, a senior oil and gas analyst for Oppenheimer Holdings in New York.
As the world's largest oil exporter, Saudi Arabia maintains a powerful influence over world oil markets.
"Failing to agree on a production policy could lead to a prolonged oil price war that could have a significant negative impact on all oil producers," he said.
The bottom line is that low oil prices have many nations in a state of panic and someone will need to take action. That action could happen this weekend. The collapse in oil prices has battered emerging economies like Venezuela, which relies on crude sales for 96 percent of its exports and more than half its gross domestic product. The South American nation is on the brink of economic collapse, while low crude prices are exacerbating existing financial crises in Brazil and Russia.
As far as the investor is concerned, oil prices slid over 3% on Friday as traders took risk off ahead of the meeting. This meeting is certain to create volatility next week and investors in oil or oil related companies may want to prepare for some fireworks.
