Would have been right

Shucks. No writer likes missed chances to look prescient.

Before the much-anticipated Apr. 17 meeting in Doha about a production freeze, this editor planned to write an editorial predicting failure of the effort.

Really, he did. He even did some research, made notes, the usual preliminaries.

Alas, other subjects presented themselves. They seemed more interesting, even more important. At the moment, he can't remember what they were.

Production chat

The market obviously thought it important that representatives of 18 producing countries, including key members of the Organization of Petroleum Exporting Countries and Russia, had a chat about oil production.

The price of crude rose in anticipation of the event and fell afterward. The mere fact of a market can move a tough market.

But this meeting was destined not to yield much.

Sure, it's easy to say that days after the meeting ended. But that editorial that never got written was going to say so beforehand. It's right here in those notes.

The prediction was easy to make. It was clear that the agreement under discussion would have influenced crude prices little beyond the short-term psychological effects. Prospects that there would be any agreement at all were abysmal. And if meeting participants somehow had produced an agreement they wouldn't have complied with it for long.

The market behaved as though discussion was about a production cut. It wasn't. It was about a freeze.

Coordinated production cuts would have meant something to an oversupplied market.

But a freeze? A freeze would have meant only that megaproducers Russia and Saudi Arabia wouldn't add more supply.

Russia probably can't. It's producing at capacity rates or nearly so. For it, a freeze wouldn't have changed things much.

For Saudi Arabia, a freeze would have meant not tapping spare capacity estimated by the International Energy Agency at 2 million b/d.

But the kingdom traditionally keeps that much capacity idle for use in emergencies and importantly pushed output above 10 million b/d a year ago just when prices were strengthening.

So it's producing at what history suggests is its top comfort level and probably has no immediate plans to raise output further, with or without a freeze.

Saudi officials, moreover, consistently have insisted they'll agree to no freeze that doesn't involve other producers, meaning Iraq and-especially-Iran.

Iraq needs to produce as much oil as it can for the money. And Iran officials all but laughed off suggestions of a freeze, saying they'll raise output by 1 million b/d or so to get production back to where it was before the imposition of international sanctions in 2012.

Ingredients of an agreement to freeze production thus were not at hand in Doha.

What's more, a freeze would have been dauntingly difficult to enforce.

Moscow doesn't exert the same measure of control over producers in Russia that Riyadh does over Saudi Aramco. The government owns controlling shares of most of them, of course, but influences national production mainly through taxation.

And Russia, like most OPEC members, has a less than enviable record of compliance with past agreements to limit production. The Saudis know that.

This all was known before Apr. 17 and would have been written about in these pages if those other subjects had not intruded, in which case no one here would have gloated retrospectively about having been right.

Psychological lift

The meeting did accomplish something. It gave oil prices a measure of psychological lift in the preceding days and weeks as physical supply and demand struggled to rebalance.

That, more than a production agreement, is what will strengthen the oil price durably. In its April Oil Market Report, IEA said balance might return in the year's second half (see story, p. 22).

Its outlook is more encouraging than any meeting can be.

Still, no one should forget the recent elevation of Saudi-Iranian antagonism-or the amount by which Saudi Arabia can raise production to enforce its wishes.