OPEC, the Organization of the Petroleum Exporting Countries, is made up of 12 of the world’s largest oil producers, including Saudi Arabia, Venezuela, Qatar, Iran and Iraq. Oil Minister Ali al-Naimi has spent a year and a half explaining that Saudi Arabia or Opec should not cut back supply and prop up prices so as to let other producers gain share.
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The sanctions, imposed over Iran’s disputed nuclear program, were lifted last month after an agreement with world powers, allowing Tehran to resume selling its oil freely in world markets. It may be reaction to some OPEC happenings in Qatar earlier in the day – but at least one analyst doesn’t think an agreement there will amount to much in the long run.
The Doha accord was likely a token gesture from Saudi Arabia to Venezuela, which faces “deep financial pain” from oil’s slump and has lobbied hard for any agreement that will support prices, Tchilinguirian said. “We have to take a step at a time”, he said.
Oil prices rose on Wednesday as efforts led by Russian Federation and Saudi Arabia to broker a deal to freeze production levels and ease a global glut turned to Iran, which signalled a tough line.
“Finally, it maintains the status quo while talks are ongoing, thereby continuing to press USA shale and other struggling oil producers outside of OPEC”. Brent crude, a benchmark for global oils, added 1 cent to $32.19 a barrel.
The Venezuelan minister Eulogio Del Pino told reporters that he and Al Sada will meet on Wednesday with their Iraqi and Iranian counterparts in Tehran to discuss the production freeze proposal.
The preliminary pact doesn’t include Iran, which is set to boost exports after the removal of sanctions.
Despite this oil price plunge, OPEC countries keep drilling. Supply still exceeds demand and record global oil stockpiles continue to swell, potentially pushing prices below $20 a barrel before the rout is over, Goldman Sachs Group Inc. said last week.
“The market was expecting a little more – cuts to production, for example, and it’s undeniable that investors aren’t fully satisfied with the pledge”, said Chihiro Ohta, general manager of investment information at SMBC Nikko Securities. Whether this is a good opportunity to reset shorts at higher levels remains a question mark.
“This freeze in no way changes market fundamentals because none of the four countries had been expected to increase production significantly any more”, energy expert and university professor emeritus Jean-Marie Chevalier told AFP in Paris.
“A silver lining is that the talks are overall a positive step forward for sentiment in advance of the scheduled June OPEC meeting”. The number hit 10.88 million barrels per day in oil production, according to Radio Free Europe.
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“Iraq and Iran are the two countries that are going to contribute to growth from the OPEC nations this year”, Richard Gorry, managing director at JBC Energy Asia in Singapore, said in a Bloomberg Television interview.
