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. The worldwide glut in oil prices that began in 2014 has hit Venezuela particularly hard, as oil makes up about 95 percent of the country’s exports and 65 percent of government spending.
Advertisement
Oil prices and the rouble had tumbled on Tuesday as market hopes for an outright supply cut were dashed.
“The decision taken so that OPEC members and non-OPEC countries freeze their production ceiling to stabilize the market and improve prices in the interests of consumers and producers is also supported by us”, Iranian Oil Minister Bijan Zangeneh was quoted as saying by Iran’s energy information network Shana.
Iran has signaled on Wednesday that it would be taking a tough stance in the discussions amongst oil producers on restraining their production, saying it would continue to increase its output until levels were reached from before the global sanctions had been imposed. “After fighting to end sanctions for years and finally being free of them, why Iran would choose to put sanctions on themselves by freezing their production?”
Oil prices rose by more than 5 per cent to climb above $34 per barrel on Wednesday after Iran voiced its support for an initiative led by Russian Federation and Saudi Arabia to freeze production to boost prices.
The remarks come a day after four nations – Russia, Saudi Arabia, Qatar and Venezuela – conditionally agreed in Qatar to cap their output at last month’s levels in order to halt a slide that has pushed oil prices to their lowest point in more than a decade.
Despite its push to ramp up production Iran has been moving away from an oil-dependent economy. Iran is the major obstacle to the first joint Opec and non-Opec deal since 2001, having pledged to increase output sharply to regain market share lost during years of sanctions. ‘The market needs a cut, not a production freeze, ‘ according to PVM analyst David Hufton.
Prices extended gains in post-settlement trade after data from industry group the American Petroleum Institute showed a stockpile drop of 3.3 million barrels versus analysts’ forecasts for a build of 3.9 million barrels.
Oil is still down 16% this year after the Organization of Petroleum Exporting Countries effectively abandoned output targets in early December and as U.S. crude inventories swelled to the highest level since 1930.
Advertisement
Goldman Sachs analyst Damien Courvalin said late Tuesday in a research note that “such a freeze will have little impact on the oil market” and that there’s “high uncertainty that it even materializes”.
