Expect life to get more expensive as oil prices start to rise

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.

Iran supports the decision by Opec and non-Opec oil producers to keep a “ceiling” on oil production, Iranian oil minister Bijan Zanganeh said on Wednesday, quoted by the ministry’s official Shana news agency.

On Wednesday, the oil ministers of Iran, Venezuela, Iraq and Qatar held talks to discuss the possibility of freezing the level of oil production. Immediately, attention turned to Iran – the long-time arch rival of Saudi Arabia – which only returned to the worldwide market last month after years of crippling sanctions, and has been itching to crank up production to fill up its state coffers.

Investors are also eyeing USA oil inventory data later on Wednesday and on Thursday for further direction on prices, with a poll of analysts forecasting a gain of 3.9 million barrels in crude oil stocks last week.

Two non-Iranian sources close to the OPEC discussions told Reuters Iran might be offered special terms as part of an output freeze deal. 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.

And Simon Williams, RAC spokesman added: “The £1 a litre petrol may disappear within weeks as we see a few more dollars added to the price of a barrel of oil”. He also stopped short of committing Iran to any production curbs.

The country increased the figure to about 1.4 million barrels per day in January this year and has planed to boost the volume to 2 million barrels per day after March.

Iran’s crude output is now in the region of 3 million barrels per day.

United Arab Emirates oil minister Suhail bin Mohammed al-Mazrouei tweeted on Tuesday that the country’s oil policy was open to cooperation with all producers toward the mutual interest of market stability. “Everybody agrees that we have to monitor the market situation and reaction, and consult on the next steps if necessary”, he added. While the news seems like a positive step toward lifting the price for crude oil, Iran remains a key obstacle to ensuring that production levels are brought in line with global demand.

Olivier Jakob from Petromatrix consultancy said that if Saudi Arabia were to freeze output at January levels, the kingdom would need to cut exports by 500,000 bpd in the summer months, when it burns more oil for power generation at home.

Markets rallied on the hope of a prospective thawing between Iran and its main Opec rival, Saudi Arabia.