Adding to the glut, Iran said it was determined to raise output to regain market share after the lifting of Western sanctions on the Islamic Republic in January. Already frosty relations between the two countries worsened in recent months over a number of issues, notably the wars in Syria and Yemen in which they are backing opposing sides.
Advertisement
Some 18 countries, including non-OPEC Russia, gathered in the Qatari capital of Doha for what was expected to be the rubber-stamping of a deal – in the making since February – to stabilise output at January levels until October 2016. Experts do not exclude corrective decrease in Brent oil prices to $30-35 per barrel, but a lot of them agree on the fact that the bottom bracket will be at the level of $40 per barrel. Some have even gone bust.
O il prices fell after a meeting of major oil producers ended without an agreement to cap production. Saudi Arabia has been working on a strategy of producing as many barrels as their customers want.
The oil market will remain oversupplied in the near term and the potential to test the 1999 lows of $9 per barrel is very real, Sam Barden believes.
After the talks in Doha, Iran’s Oil Minister Bijan Namdar Zanganeh said some producers are under the “illusion” that they can get the nation to limit its oil production and effectively reimpose sanctions on itself.
Zangeneh said Iran supports all efforts to return stability to the oil market, stressing that the Islamic Republic will spare no effort to that connection.
While the Doha meeting resulted in no deal, one thing is for sure – Iran is going it alone when it comes to oil. It tumbled 7 percent in earlier trading.
Advertisement
“It has sacrificed a stronger barrel price in favour of over-producing in a bid to maintain its share of the oil market against the United States which had been producing greater volumes of oil from fracking”. The Opec meeting is on June 2. Rather than coordinated production cuts by the cartel, the market may see unilateral actions from individual countries. “Iraq’s view is to have a freeze in output for a short period to help protect the interests of both producers and consumers equally by easing the surplus from the market and improving prices”.
