Saudi Arabia dominates policy-making within the 13-member bloc of oil producing countries, which has refused to cut its official production targets.
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The position of Iran is crucial because the country, regional rival Saudi, has little reason to accept freeze – let alone reduce – its production when it is set to make his return to the worldwide oil market after the lifting of sanctions over its nuclear program.
Oil-related exchange traded funds are rallying Wednesday after Iran said it could support the discussion among four of the largest oil producers to freeze output in an attempt to halt the plunging energy prices.
Global oil demand past year was very high and “exceptional” as low oil prices boosted demand from transportation and petrochemical industries in the U.S., China and elsewhere in Asia, OPEC said in its February monthly report. U.S. inventories expanded to 504 million barrels, the highest level in data going back to 1930, according to the Energy Information Administration.
“The oil issue will be determined by supply and demand and by market forces”. April Brent crude on London’s ICE Futures exchange fell 22 cents, or 0.6%, to end at $34.28 a barrel.
In addition, Iran announced that it would support an oil production ceiling despite its first post-sanction oil hitting the worldwide markets this week.
OPEC members Qatar, Venezuela and Kuwait said they were also ready to freeze output and oil sources in Iraq – the world’s fastest-growing producer in the past year – said Baghdad would abide by a global deal aimed at tackling a growing oversupply and helping prices recover from their lowest in over a decade. “I share the consensus view that producers are unlikely to reach an agreement (on cuts), the rationale being the need to satisfy two conditions”, said Ric Spooner, chief market analyst with Sydney’s CMC Markets. Zanganeh has not explicitly stated that Iran would keep its output at January levels.
Markets are better off looking at gasoline futures to get a better handle on oil price’s trajectory, Citibank Kleinman said.
Oil has dropped over the past year due to booming United States supplies and Opec’s decision, led by the group’s biggest producer Saudi Arabia, to ramp up exports and drive higher-cost producers out of the market. “Given weak forecast output growth amongst committed countries, the agreement will remove few, if any, barrels from the market”, a commentary said.
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The expert also expressed doubt that the agreement would be joined by other major oil producers.
