Oil prices increased on Tuesday onspeculation that Iran may cooperate with other oil producers tofreeze production. “If this freezing issue helps prices to improve, Iran by positive words of support, will help”.
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Crude prices continued to move sharply higher following the U.S. open on Tuesday with sentiment boosted by further speculation from sources that Iran would attend the OPEC meeting scheduled for next month in Algeria.
Prices surged partly on speculation that informal discussions among members of the Organization of Petroleum Exporting Countries may lead to action to stabilize the market. Iran hasn’t decided whether to join any action, according to the people. So, the relationship between crude oil inventories and crude oil prices is inverse, as the above graph shows. “So (OPEC members) are busy among themselves formulating an agreement”.
The previous attempt to freeze output collapsed in April after Saudi Arabia insisted that it would join the initiative, supported by non-OPEC producers such as Russian Federation and Venezuela, only if Iran were on board. It pumped 3.6 million bpd in July, OPEC figures show.
Since Khalid al-Falih replaced Ali al-Naimi as Saudi energy minister in April, the Kingdom has softened its rhetoric about Iran’s oil program.
Besides Iran, output levels in Nigeria and Libya could also complicate reaching a deal.
The kingdom has reached record production, leading to a collapse in prices which has hit the country as well as other producers hard. Libya is pumping a fraction of its pre-conflict rate.
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United States crude oil and petroleum product inventories (excluding strategic petroleum reserves) were ~1,393.5 MMbbls-historic high levels for the week ending August 12. “Agreeing a number may be a challenge – unless they all agree to allow some form of flexibility?” the senior industry source said. As they say they have highlighted before, there was no shortage of headlines in the build up to the last OPEC meeting, so this comes as little surprise and as Deutche Bank have noted, its is their expectation that a coordinated output freeze will have little meaningful fundamental impact anyway. “And even if, and I am saying “if”. we agreed to a freeze, no one will commit to stick to it”, the source said.
