“The market continues to be reactive to the claims of cooperation of OPEC and Russian Federation, giving them tremendous benefit of the doubt on their talk of potential coordination”, said John Kilduff, partner at Again Capital LLC.
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Iran’s rival Saudi Arabia has said it would agree to a deal only if Tehran took part.
So, taking the words of the four major producers and putting them together and you end up with one saying they will supply as much oil as their customers need and that there is no need for a freeze now (Saudi Arabia), one saying a freeze would be nice (Russia) and two saying they plan to increase output and exports (Iran and Iraq). Russian Energy Minister Alexander Novak commented that he was open to ideas on what cut-off period to use if producer countries chose to freeze output.
Attempts by OPEC and non-OPEC oil exporters to reach a pact on stabilizing output levels earlier this year foundered because Iran, which is anxious to increase exports after the lifting of worldwide sanctions, declined to participate.
Trading this week has remained fairly choppy as the market focused on the possibility that the world’s top oil producers could strike a deal on an output freeze later this month.
A proposal to freeze crude oil production levels at early 2016 rates collapsed this year along multilateral fissures.
Even if the Monday statement was short on action, it marks a significant development in the Russia-Saudi relationship.
Monday’s joint statement by the oil ministers of Saudi Arabia and Russian Federation, billed as a “significant” announcement, was “without any substance for market balances”, Amrita Sen, chief oil analyst at consulting firm Energy Aspects Ltd., said in Singapore.
If production is frozen at early-2015 levels, it would effectively mean an output cut as most producers – including Saudi Arabia, Russia, Iraq and Iran – have steeply boosted production since then.
Iran has argued that it needs to regain market share lost during years of Western sanctions, which were lifted in January.
Following Monday’s United States market holiday, the American Petroleum Institute (API) inventory data will be released on Wednesday rather than the normal Tuesday with dollar trends likely to be a significant focus in USA trading today.
“The market is getting better and we noticed that the prices reflect this (improvement)”, said Falih.
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Despite their differing views, Mr Novak said he favoured choosing a month from the second half of this year that would be the benchmark for a production freeze. “A coordinated and appropriate, collective decision on production will help bring balance and reduce inventories in a more timely manner”.
