The Islamic Republic of Iran says the Organisation of Petroleum Exporting Countries (OPEC) is illogical with its request for Iran to freeze production at January 2016 levels.
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Now, he added, how can those same countries expect Iran to be cooperative and to pay the price. “The idea that you might stem the supply of oil by telling everyone to freeze the production at record highs doesn’t really seem like a good strategy to try and bring up the price”, he added.
The energy minister of Qatar, Mohammad bin Saleh al-Sada also told a news conference that this move would help stabilize the world price of oil.
Iran has said it will increase its oil production by 500,000 barrels a day after worldwide sanctions were lifted in January under a deal with world powers to curb its nuclear program.
Reuters reported a $2-per-barrel rise in the oil price after Zanganeh’s comments. The group’s aim has been to ride out the 12-year lows in prices and force higher-cost producers, including shale drillers in the USA, out of the market.
Apparently that was perceived as a bullish sign by the oil market, which rallied in anticipation of some sort of agreement among big oil producers. Oil prices recently plummeted below United States dollars 30 a barrel, the lowest in 13 years.
Brent Crude rose by 6.5% ahead of the agreement Tuesday, but later dropped by 3.6%.
Oil is down about 21 percent this year on speculation a worldwide surplus will persist amid brimming US crude stockpiles and the outlook for increased Iranian shipments.
It is hard to see what incentives the others could offer Iran to freeze its output, and as long as Tehran is not part of the deal it is meaningless. “Iran is returning to the market and needs to be given a special chance but it also needs to make some calculations”, said one source.
Many believe that the fact that major OPEC producers such as Saudi Arabia have refused to cut production would kill US production by driving down prices and forcing some producers out of business.
On Wednesday, the oil ministers of Iran, Venezuela, Iraq and Qatar held talks to discuss the possibility of freezing the level of oil production. “The establishment has decided so”.
A spokesman for the Iranian ministry said the talks would begin at 2 pm (1030 GMT).
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The last global deal in 2001 saw Saudi Arabia persuade Mexico, Norway and Russian Federation to contribute to production cuts, although Moscow did not follow through and raised exports instead.
