Oil prices slipped off session highs on Tuesday after four of the world's largest producers agreed to freeze output at January levels if other major exporters joined the pact, dashing hopes among the price bulls for an outright cut to supply.
Qatari energy minister Mohammad bin Saleh al-Sada told a news conference that the step would help to stabilize the oil market, which has experienced price declines not seen since the early 2000s because of the pace at which supply has outstripped demand.
Analysts said that the decision is a step in the right direction to bring supply and demand back into balance but global inventories remain near record levels and are likely to dampen any price rallies.
"I don't think it will have a huge impact on supply/demand balances, simply because we were oversupplied in January anyway. We’re just even more oversupplied now," Energy Aspects analyst Dominic Haywood.
"So in that regard it’s not huge, but it’s a step in the right direction. But you’ve still got a huge amount of inventory that is going to weigh on the price for a long time and we need to clear that, because it’s going to kill any rally."
The oil ministers of Russia and Venezuela attended the meeting in the Qatari capital, together with Saudi oil minister Ali al-Naimi, who said the group's next steps would be assessed over the coming months.
Brent crude futures were up by only 18 cents at $33.57 a barrel by 1305 GMT, having fallen from an earlier peak of $35.55, the highest price since Feb. 4.
U.S. crude futures were up by 10 cents at $29.54, off the day's high of $31.53.
Oil prices have fallen by more than 70% in the past 20 months, driven down by near-record production both from OPEC members and other producers, such as Russia.
The drop has eroded the finances of even the more affluent oil-producing nations, forcing governments to cut spending, increase deficit forecasts, borrow more and push through politically unpopular reforms.
Sources familiar with Iranian thinking on supply said Tehran would be willing to consider a freeze once its output had reached pre-sanctions levels.
"The output freeze is disappointing because it's not an outright cut, and with Iran not a part of the meeting it’s still a bit far-fetched to think this is a precursor to a future cut. Iran’s absence from the meeting means overall OPEC output should still rise," CMC Markets analyst Jasper Lawler said in a note.