Oil wrapped up April on a much surer footing, posting its best month seven years to set new 2016 highs. The recovery comes despite a failure at a meeting in Doha to curb production, with output now hovering close to all-time highs.


Doha Forgotten


Crude prices plunged in the immediate aftermath of the failed Doha talks. Major producers failed to agree output curbs, which was seen as bearish for prices. But the recovery in crude prices since the meeting has been impressive.

Looking back, Doha looks like a blip. Oil had been on the tear since its mid-February lows and the failure of the talks was a small distraction as crude continued to rise through to the end of April. In posting its best month in seven years in April, crude prices had rallied by something in the region of 75-80% since the February trough.

Output Record


The rise in prices came despite OPEC production hitting an all-time high in April, as increases from Iran and Iraq more than compensated for the decline in Kuwait.

Production totalled 32.64 million barrels per day last month, up from 32.47 million bpd in March, within a hair’s breadth of January’s peak of 32.65 million. Strikes in Kuwait led a fall in production from the country, while Saudi Arabia did not increase output.

Mixed US Picture


US stockpiles continue to rise, meanwhile. Figures from the US Energy Information Administration continue to inventories increasing, while the Cushing, Oklahoma storage hub is still at near full capacity.

Despite the rising inventories, US output is declining. Production slipped to 18-month lows, although the rally in prices could support what some analysts see as a resurgence in US shale. 

Weak Dollar


In tandem with the rally in oil is a decline in the US dollar. A weaker greenback tends to support the price of commodities priced in dollars.

USD is trading near to its lowest level this year against a basket of currencies as the Federal Reserve pushes the prospect of a rate hike even further out. The dollar index is down around 6% this year. Sluggish US growth is not aiding the buck’s case – GDP expanded at just 0.5% in the first quarter, supporting the Fed’s cautious view of the domestic economy.

OPEC Meeting


Now attention shifts to the June meeting of OPEC in Vienna, at which there could yet be some moves on production. Even with the recent rally in crude, the price is still some way short of break-even point for most members.

Saudi Arabia will be key to any reduction in output – it needs to get Iran to agree to a reduction even as the latter seems intent on taking back market share as fast as it can.

But if the lessons of Doha mean anything, it’s that a deal on production is not the only thing affecting the price of oil in 2016.