Top exporters of oil, Saudi Arabia and Russian Federation agreed Tuesday to a freeze of their levels of output, but said the agreement would be contingent on other producers also joining, a big sticking point as Iran was absent for these talks and is determined to increase its production.
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That oil didn’t lose all of its Monday gains is largely due to the comments from acting OPEC president Qatari Energy Minister Mohammed bin Saleh al-Sada, who called the meeting “successful” and noted that “This step is meant to stabilize the market”.
A senior official at National Iranian Oil Company confirmed that a follow up meeting would take place today in the capital. The prices came under renewed pressure by the return of Iran to world markets after the lifting of global sanctions linked to its nuclear programme.
Four of the world’s biggest oil-producing nations moved to freeze their production Tuesday to try to halt the 70 percent drop in the price of crude because of a glut of oil on world markets.
“If the other producers do not agree, then very little will change, but even if they do, any significant price recovery risks increasing the incentive for US shale output to start growing again”, Barclays analysts said.
“I wouldn’t expect oil to breach $40 until we get into the second half of the year, that’s simply because we’re massively oversupplied still”.
The country is reportedly at least 1 million barrels per day below its capacity at pre-sanction levels.
“What is important first of all is that right now the oil market faces an output surplus and, secondly, Iran won’t relinquish its share”, Oil Minister Bijan Zanganeh said.
On Tuesday, Iran’s petroleum minister, Bijar Namdar Zangeneh, signaled the Islamic Republic has no intention of giving up its share of the market. Supply still exceeds demand and record global oil stockpiles continue to swell, potentially pushing prices below $20 a barrel before the rout is over, Goldman Sachs said last week.
Russia, on its own and as a non-member of OPEC, produces almost 11 million barrels a day.
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Azerbaijan has no plans to freeze its oil production, Natiq Abbasov, the country’s deputy energy minister, said by e-mail. “The agreement (if successful) should support oil prices but there are reasons to be cautious”.
