Oil prices fell on Friday in thin trade as analysts said a weekend meeting of major oil exporters would do little to help to clear global oversupply quickly, even though it would provide a floor for the market.
Oil producers led by top exporters Saudi Arabia and Russia will meet in Doha, Qatar, on Sunday to discuss freezing output around current levels in an effort to contain a glut exacerbated by production that exceeds demand by about 1.5 million barrels a day.
It would be the first joint action by major OPEC and non-OPEC producers in 15 years, though Iran has refused to participate, saying that it wants to rebuild its output to levels achieved before imposition of the recently lifted economic sanctions.
“Momentum is building behind an agreement that likely excludes Iran (and potentially Libya). While there will likely be little effect on the physical market an agreement would represent an important psychological shift in setting oil prices,” investment bank Jefferies said on Friday.
Brent crude futures were down 2 percent at $42.93 by 1330 GMT. U.S. West Texas Intermediate (WTI) futures were also down 2 percent, trading at $40.63, having lost as much as 3 percent earlier in the day.
Yet with discussions among producers focusing on freezing output rather than cutting it, most analysts said they had little hope for a deal that reduces the global oversupply.
The glut has pulled down crude prices by as much as 70 percent since mid-2014.
“The Doha meeting does not materially change the oil market balances,” Barclays said.
“If recent supply-side fundamental support holds and the market’s expectations for a credible statement and commitment are met, the meeting could help prevent prices from falling back to the low $30 range.”
Consultancy Petromatrix said it saw the Saudis as a G20 member pushing for a deal to freeze output because both the IMF and the U.S. Federal Reserve are growing increasingly impatient about low oil prices.
“Saudi Arabia has already frozen production at January levels and it now needs other countries to make some concessions,” said Olivier Jakob, of Petromatrix.
“Otherwise it fears that it will be forced by the G20 and its international institutions to cut production to stabilize oil prices -- and cutting production is something it does not want to do as Iran comes back.”
Energy consultancy Wood Mackenzie said that even if a deal is agreed, it does not expect a genuine freeze to occur during the remainder of 2016.
Instead, Wood Mackenzie said it expects OPEC output to rise by 0.5 million barrels per day year on year in 2016, with most of that growth coming from Iran and Iraq, both of whom have indicated plans to increase output this year.