The April 17 Doha meeting of major oil producers ended in disarray after Saudi Arabia’s ambitious economic czar, Deputy Crown Prince Mohammed bin Salman (MbS), abruptly blocked the deal to “freeze” oil production because Iran was not party to the formal agreement. After months of uncertain negotiations by officials from Russia, Qatar, and Saudi Arabia, a draft agreement to freeze production at January levels until October, with a high-level committee created to monitor compliance, was widely circulated the day before the scheduled meeting. On arrival in Doha Saturday, the Saudi delegation appeared prepared to move forward with the deal even without Iran’s participation. However, by Sunday morning, Oil Minister Ali al-Naimi said Saudi Arabia would not sign a deal without Iran on board.

The ensuing diplomatic maneuvering on Sunday started with the morning meeting delayed while key players made their way to discuss the impasse with Qatar’s Emir Tamim bin Hamad al-Thani, a principal orchestrator of the initiative. The talks resumed in the afternoon with reports that discussions over the draft communique were especially acrimonious between Saudi Arabia and Russia. Following the Doha meeting, in a media briefing, Russian Energy Minister Alexander Novak criticized the last minute demands by Gulf states to include Iran, lamenting that two months drafting a proposal to stem the decline in oil prices came to naught. After exhausting all possibilities, Qatar’s energy minister, Mohammed bin Saleh al-Sada, announced the group “needs more time.”

According to reports, the backtracking by Saudi Arabia followed an early Sunday morning phone call from MbS to Naimi, instructing him to pull the plug on the agreement if Iran was not part of it. The eleventh-hour intervention by MbS has rattled policy and market analysts, who have viewed Naimi as a stabilizing, pragmatic policymaker.

Speculation is rife that geopolitical tensions between Saudi Arabia and Iran were behind the derailment. Concerns that MbS is using Saudi production muscle as an oil weapon against the kingdom’s nemesis Iran threatens to inject a new level of uncertainty and instability into markets already reeling from a more than 60 percent drop in prices since mid-2014. Indeed, MbS had previously asserted that there would be no deal without Iran in a wide-ranging interview with Bloomberg on April 1, but his comments were likely viewed as political rhetoric from above at the time. MbS told Bloomberg just two days before the meeting that the country could raise production to 11.5 million barrels per day (mb/d) immediately. Markets now have a laser focus on comments from MbS, igniting concerns the kingdom could ramp up production further as Iran raises output post-sanctions – derailing an already fragile rebalancing of the market underway. Saudi Arabia has stayed steadfast in its strategy to go for market share at the expense of cutting output to support prices since the OPEC ministerial meeting in November 2014. Indeed, Saudi Arabia has quietly increased production over the period, to an average 10.2 mb/d in the first quarter of 2016 versus 9.6 mb/d in the fourth quarter of 2014.

From the start of discussions in 2016, Iran ruled out participating in the production freeze on the grounds it needed to recapture lost market share and restore production to its 4 mb/d pre-sanction production level from just 2.85 mb/d on average in 2015. “If Iran keeps oil output at January levels, it means that there is no impact on the lifting of sanctions,” Iranian Oil Minister Bijan Namdar Zanganeh said on April 17.

The exuberance in the weeks leading up to the meeting spurred oil prices 40 percent higher, and, as expected, the debacle in Doha added downward pressure on futures prices when the market opened on Monday morning. The modest decline, to just below $40 per oil barrel (bbl) for U.S. West Texas Intermediate (WTI), was tempered by a Kuwaiti oil workers’ strike that temporarily shut-in more than 1 mb/d. By April 20, oil markets had shrugged off the failure in Doha, with prices rising to five-month highs, with WTI futures trading above $44/bbl.

Saudi Arabia’s last minute policy reversal in Doha was disconcerting but it remains to be seen if there is a fundamental shift in Saudi policy going forward. The last minute instruction from MbS to abandon the deal, albeit clumsy in its timing, may have even been made in consultation with Naimi. Indeed, as part of a broad restructuring following King Salman bin Abdulaziz’s ascension in January 2015, the Council for Economic and Development Affairs (CEDA) was created, with a comprehensive remit for the country’s economic policies and initiatives, and is chaired by MbS. The Ministry of Petroleum and Mineral Resources was brought under the umbrella of CEDA instead of its previous direct line to the king. MbS therefore is also in charge of the Oil Ministry above Naimi.

Naimi has largely enjoyed autonomy in decision making for the past two decades on the job with a direct line to consult with former King Abdullah. Little is said publicly of his working relationship with MbS and perhaps clouding the picture is the minister’s long-stated plans to retire, having reached 80 years of age. Traditionally, oil ministers have not been members of the ruling family in Saudi Arabia.

Naimi is a known figure who navigates oil policy based on supply and demand fundamentals and price outlooks with a longer-term strategic focus on future energy market scenarios driven by climate change policies, renewable energy resources, technological advances (such as those that enabled the shale oil revolution), or a “black swan” event, with an eye to the day when oil demand for the country’s crude will peak. In a speech at the Organization of Arab Petroleum Exporting Country’s Arab Energy Conference in December 2014, the minister asked “Is there a black swan that we don’t know about which will come by 2050 and we will have no demand?” Whenever Naimi retires the oil market will be hoping for an equally pragmatic, technocratic approach to the job.

Expectations that a Doha agreement, albeit modest, would lend support to market sentiment and hasten a rebalancing of oversupplied markets proved overoptimistic. With the prospect of major oil producers enacting any concerted plan to manage supply dismissed for now, the run-up in oil prices ahead of Doha appears to have put a new floor of $40/bbl in place. A wide range of forecasts for when a rebalancing of supply and demand takes hold are circulating, with declining non-OPEC supply, especially U.S. oil production, a key data point. The latest forecast by the International Energy Agency sees a rebalancing of oversupplied markets starting in the third quarter of 2016. Global oil demand is forecast at an average 96.7 mb/d in the second half of 2016 while supplies are projected at 96.3 mb/d for the period.

Barring any major policy changes by Saudi Arabia, discussion of OPEC’s role in managing global oil supplies is expected to be a topic of discussion at the next ministerial conference on June 2. There are reports of resurrecting the dialogue between OPEC members and non-OPEC members on the sidelines of the meeting. However, if the current upward momentum in oil prices is maintained, there may be little need for a coordinated action by OPEC and non-OPEC producers.