The Islamic Republic’s OPEC envoy Mehdi Asali said: “Asking Iran to freeze its oil production level is illogical”, according to Iranian newspaper the Shargh.
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Iran has signaled on Wednesday that it would be taking a tough stance in the discussions amongst oil producers on restraining their production, saying it would continue to increase its output until levels were reached from before the global sanctions had been imposed.
Iran’s Oil Minister Bijan Zanganeh has been joined by Iraqi counterpart Adil Abdul-Mahdi, Venezuelan Oil Minister Eulogio Del Pino and Opec president and Qatari Minister of Industry & Energy Mohammed bin Saleh al-Sada at the Tehran gathering.
The longer it takes for a price recovery to begin, the longer it will take for the market to come full circle, Vice President of Crude Logistics and Hedging at Continental Resources (ticker: CLR, ContRes.com) Kirk Kinnear told Oil & Gas 360®.
The plan to freeze oil production to push up prices seems to be falling at the first hurdle.
Opec Gulf producers Qatar, Kuwait and the UAE as well as Venezuela said they would join the pact, aimed at tackling a growing oversupply and helping prices recover from their lowest in over a decade.
“Iran has made it clear it will not consider any freeze or cut until it returns to its pre-sanction levels”, consulting firm Wood Mackenzie said in a statement.
That hardly does anything to balance the oil market.
Oil prices have dropped below $30 a barrel in recent months, a fall of 70 percent since 2014. “There is no reason for Iran to do so”. Russian Federation also failed to respect a similar agreement with OPEC producers in the 1990s and even when it last agreed to cooperate with OPEC back in 2001, Russian Federation never followed through on its pledge and rather, raised oil exports. This nose-dive has been particularly excruciating for countries like Russia, Saudi Arabia and Venezuela, whose budgets rely heavily on energy revenues. However, the sanctions cut their exports to only 1.1 million barrels per day.
Still, the Iranian oil minister on Wednesday indicated that Tehran may budge – at some point – saying “this is the first step and other steps should also be taken”.
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Crude prices, which shot up to levels around $35.55 per barrel following news of the hush-hush producer meeting, however, pared some of the gains and was trading below $34 as expectations of an immediate deal faded. “Iraq can sacrifice in freezing its production because it’s going to lead to an increase in oil prices…What’s the benefit of selling oil with low prices”.
