Aiming to Halt Crisis, Venezuela Seeks Production Freeze by OPEC

Oil ministers of top exporter Saudi Arabia, Qatar and Venezuela, together with non-OPEC member Russian Federation, said after meeting in the Qatari capital of Doha on Tuesday they had agreed to keep output unchanged from January, provided other big guns followed suit.

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.

This morning, the energy ministers of Venezuela, Iran, Iraq and OPEC president Qatar met in Tehran to convince both Iran and Iraq to agree to the freeze.

Iran has vowed to gradually increase its oil production this year by about half a million barrels a day, taking advantage of export opportunities now that global sanctions on its petroleum sector have been eased as part of the accord limiting its nuclear program.

It could become the first joint OPEC and non-OPEC deal in 15 years, as oil producers seek to boost persistently low oil prices.

Options expiry in US crude also fed Wednesday’s rebound, some traders said. The country has been freed from these limits for about a month, so it doesn’t really make sense for Iran to yield to the pleas of the four oil producing countries. Oil prices recently plummeted below $30 a barrel, the lowest in 13 years.

However before Wednesday’s talks Mehdi Asali, Iran’s director general of OPEC Affairs at the oil ministry, blamed other producers for creating a glut and signalled Tehran would not change course. But analysts at Goldman Sachs said that even if the Saudi-Russia output freeze were to work, it would not be enough to send prices significantly higher.

Second, the production freeze comes during a period when the oil production of these four countries has been near all time high. But Iran initially said it won’t stop increasing its exports. “It could mark the beginning of further cooperation between OPEC and other producers to improve the situation in the oil market”, the Minister said. A Reuters survey released on January 5 showed Iranian production at 2.9 million bpd in December.

Iran used to export 2.3 million barrels per day, but its crude exports fell to 1 million in 2012, when sanctions were tightened.

“Although this is the first step it should not be the last”. While Iranian Oil Minister Bijan Zanganeh supported the production freeze, he did not indicate that Iran had any intentions of joining other OPEC members in capping production.