Oil producers set to meet in Doha to discuss freeze

Officials from many of the world's top oil-producing nations gather in Doha, Qatar, this weekend with the goal of trying to cobble together an agreement to limit output in a bid to boost or at hold the line on depressed prices.

But given the continuing glut of oil, many observers say that even if a production freeze agreement is reached, prices are likely to remain stable at least into summer.

"To agree to a cap or a freeze, it's not a binding constraint," says Ed Hirs, energy economist at the University of Houston. "It really should not have any impact on the market apart from the window dressing." After all, he says, they are "not going to run out and drill a bunch of new wells."

In an oil production market searching for good news, at least prices aren't in free fall anymore. They have stabilized for the moment ahead of the meeting. The benchmark U.S. crude, West Texas Intermediate, was up 84 cents, or 2%, at $40.63 a barrel in New York, while the international benchmark, Brent crude,was up 91 cents, or 2.1%, at $42.93 a barrel in London.

The Doha meeting is expected to draw ministers from members and non-members of the Organization of Petroleum Exporting Countries. The meeting comes after price dips that sent oil prices plummeting, an apparent move by low-cost producers like those in the Middle East to drive out some of the higher-cost producers, those in the U.S. and Canada, in a bid to boost prices.

The strategy appears to be working, Hirs says. Some 1,200 rigs are sidelined in the U.S. with hundreds of thousands of workers idled.

Indeed, the International Energy Agency said in its monthly oil report Thursday that global oil supplies shrank 300,000 barrels a day in March. Both OPEC and non-OPEC producers are pumping less crude. On the OPEC side, increases by Iran and Angola were offset by decreases in Nigeria, the United Arab Emirates and Iraq.

Even if oil ministers in Doha agree to a freeze on current production levels, "a freeze means we are going to produce at maximum levels," says Tom Kloza, global energy analyst for the Oil Price Information Service. Just trying to get an agreement between Saudi Arabia and Iran, major producers who are both struggling for more power in the Middle East, is a daunting prospect.

For U.S. consumers, cheap gasoline should continue into the summer. Kloza says prices are likely to be 25 cents to 50 cents a gallon cheaper than a year ago during the same peak driving season.

Both Kloza and Hirs, however, believe that oil prices could start to increase by the end of the year.

"The prospect for rebalancing oil markets, where demand equals supply -- that will happen in the second half of the year," Kloza says. Until then, "there's a helluva glut that needs to be worked off."