Oil rallies following Tehran meeting, but Iran stays cool on freeze plans

Analysts were encouraged that Iran’s oil minister met with representatives of other major producers a day after Saudi Arabia, Russia, Venezuela and Qatar said they were prepared to freeze output at January’s level, but only if other major producers followed suit.

“Asking Iran to freeze its oil production level is illogical … when Iran was under sanctions, some countries raised their output and they caused the drop in oil prices”, Asali said.

The OPEC members appeared to welcome a freeze on output agreed to Tuesday by Saudi Arabia, Russia, Venezuela and Qatar, but conditional on other countries agreeing to similar freezes.

After oil prices rose in the previous session as much 8%, commentators suggested markets had overreacted to Iran’s support for the caps and said the Russian-Saudi move was not likely to reduce the global surplus.

Iranian Minister of Petroleum Bijan Zangeneh said Tehran supports any move to stabilize the situation in the worldwide crude oil market and improve the price of the product.

The nation should increase 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.

US crude closed up $1.62, or 5.6 percent, at $30.66 a barrel.

Oil jumped by more than five per cent, and the Canadian dollar rose above 73 cents USA as optimism grew Wednesday about a deal to curb overproduction of crude. “This is a positive step, we have a positive approach to it, this is a good start”, he said.

At the same time, the Iranian Minister said that the impact of the Doha decisions on pricing mechanism could be assessed only after some time.

The first mooted global oil pact in 15 years has so far failed to impress the market, which had expected a production cut instead of a freeze that could even turn into an increase if Iran wins special terms from fellow OPEC members.

Iran, which was the second-biggest producer in OPEC before sanctions were intensified in 2012, is seeking to boost output by 1 million barrels a day and regain market share.

“I share the consensus view that producers are unlikely to reach an agreement (on cuts), the rationale being the need to satisfy two conditions”, CMC Markets chief market analyst Ric Spooner said in Sydney.

“Although this is the first step it should not be the last”.

“The market is coming around to the idea that it is not bad news, but not as good news as it was anticipating”, he said, adding that investors were hoping for production cuts.