Under a proposal that could lead to the first global oil production deal in 15 years, major producers would freeze their output at January levels.
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“The price rebound looks like an overreaction as the probability of Iran not increasing production is still low in our view”, ANZ said in a note on Thursday. Qatar and Venezuela have already agreed to participate but the deal was also contingent on other producers joining in.
Mehdi Asali, the OPEC envoy for Iran said that asking the country to freeze its production levels of oil was illogical, when the country was under sanctions, certain countries raised output and caused oil prices to drop.
Oil prices were lifted on Wednesday (Feb 17) by news that Iran entered talks with other major producers to address low prices, although it stopped short of committing itself to any production curbs.
A freeze in production from January’s near-record levels would do little to relieve the glut, analysts said.
On Tuesday, the energy ministers of Russia, Saudi Arabia, Venezuela and Qatar met in Doha.
Iran should have increased production by 500,000 barrels a day by March 20, the end of the Iranian calendar year, Shana reported on Wednesday, citing Roknoddin Javadi, managing director of National Iranian Oil Co.
Analysts had expected crude inventories to climb by 3.9 million barrels in the week to February 12, according to a Reuters poll on Tuesday.
‘The deal doesn’t add much to rebalance the market, but it is still important that the parties talk.
“Kuwait hopes the agreement would provide a positive atmosphere for oil prices, and for the market to regain balance, and calls on all to support stability of markets”, he said.
Mahony said the conversion should be centered around a production cut, instead of a freeze – but a reduction in output isn’t likely to happen.
However, two non-Iranian sources close to OPEC discussions told Reuters that Iran may be offered special terms as part of the output freeze deal.
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The Iranian minister further emphasized that his Venezuelan, Qatari and Iraqi counterparts also agreed that there needs to be mechanism to monitor the conditions of the market as well as its behavior. For instance, Iran reiterated that it intends to grow its output back to pre-sanctions level. “The establishment has decided so”. Zanganeh didn’t mention if Iran, the second-biggest Opec producer before sanctions were intensified in 2012, would deviate from plans to restore exports after the lifting of penalties last month.
