Sources familiar with Tehran’s oil policy say that the country is approaching its pre-sanction production levels, giving it more flexibility to cooperate.
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Oil rallied with few stops over the past two weeks, going from a bear to bull market as it reversed a loss of over 20 per cent in early August on speculation Saudi Arabia and the rest of the Organization of the Petroleum Exporting Countries will agree to a production freeze with Russian Federation and other non-OPEC members.
Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries, refused to join a previous attempt this year by the group and non-OPEC members led by Russian Federation to stabilize production.
“This is just more jawboning”, said Sarah Emerson, managing director of ESAI Energy Inc., a consulting company in Wakefield, Massachusetts.
Those nations are seen as more anxious to boost crude prices than OPEC producers such as Saudi Arabia and Iran, which are more keen in protecting market share.
We, however, believe that OPEC and Russian Federation will arrive at some kind of a deal in Algeria and the markets are likely to react positively to the news, as very few experts believe that a deal will go through.
International Brent crude oil futures were trading at $49.57 a barrel early on Wednesday, down 39 cents, or 0.8%, from their last close. Prices subsequently retreated as Iraq sought to increase exports and Nigerian militants called an end to hostilities, potentially boosting supply.
Analysts said the falls were a result of an overdone price rally this month which lifted crude by over 20 percent between the beginning of the month and late last week. Total volume traded yesterday was about 36 per cent above the 100-day average.
US West Texas Intermediate (WTI) futures finished well off session highs, rising 28 cents or 0.6% to $47.69 a barrel at 4:41 pm ET on the New York Mercantile Exchange. The global benchmark crude traded at a premium of $1.60 to WTI for October.
“This obviously gives cause for optimism but it’s far from concrete action”, said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “We’ll have to see if they sell on the news”. Russian Energy Minister Alexander Novak said he was open to discussing a freeze. Saudi Arabia was open to a production cap under the condition that Iran would agree to one as well.
Iraq asked worldwide oil companies to boost output just as other OPEC nations are heading for talks amid a global glut.
Iran’s Minister of Petroleum Bijan Zangeneh (bottom left) attends the 169th OPEC meeting in Vienna, June 2, 2016. Similarly, Zero Hedge’s sources expected an 850,000 barrel draw this week, while analysts polled by S&P Global Plattsexpected a 200,000-barrel rise in US crude inventories.
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Overnight, oil prices fell sharply for the second day in a row on Tuesday, retreating further from the highest levels in almost two months.
