Iran yet to commit to oil output freeze

Iran’s envoy to the Organisation of the Petroleum Exporting Countries (Opec), Mehdi Asali, said it was “illogical” to ask Iran to freeze production levels in comments to the Shargh daily newspaper before the talks on Wednesday.

On Tuesday, the energy ministers of Russia, Saudi Arabia, Venezuela and Qatar met in Doha and agreed to freeze their average monthly oil output throughout 2016 at January levels if other countries joined the initiative.

“We look forward to the beginning of cooperation between OPEC and non-OPEC countries and we support any measure that can stabilise the market and increase prices”, he was quoted as saying by the ministry’s news service, Shana.

Iranian officials have now said that they have no intention of freezing output at a time when they have plans to ramp up production by 500,000 barrels per day.

Crude prices have fallen from highs above $100 a barrel with little resistance for most of the past 20 months, as new USA shale output added to near-record output by the Organization of the Petroleum Exporting Countries and other major producers such as Russian Federation. Whereas a barrel went for as much as $115 (103 euros) in mid-2014, it recently dropped below $30.

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

Natixis lead oil market analyst Abhishek Deshpande told journalists in Paris that a freeze in production was not enough and is likely to unravel, with only an aggressive cut sufficient to mop up excess crude in the market.

Venezuela, Qatar and Kuwait also signed on, but all agreed the move was conditional on other major producers joining in.

However, there was no commitment from Iran to actually keep its own output at January levels.

Iran, which is returning to OPEC after a long absence, Footprint to Africa learnt, exported its first crude oil consignment to Europe on Sunday. “Until we see the fundamentals improve, we’re not going to get a sustainable uplift in the price”.

Citi Futures analyst Tim Evans warned Wednesday’s rally in oil prices could be brief.

“A freeze is not the same as a cut, and somewhat disingenuously, keeping crude production at January levels actually implies higher-than-expected annual output… and so can hardly tackle the current market oversupply”, JBC Energy said in a note.