US crude climbs further on Iran support for oil output cap
This is despite fellow OPEC ministers holding a meeting in Tehran to try and broker a deal. One of the flaws in the oil deal, is the fact that Saudi Arabia and its allies have chosen to freeze production at January levels which were already high.
Bijan Zanganeh, oil minister for Iran, says “This is the first step and other steps should also be taken”.
As for itself, Iran will continue to ramp up oil production.
Market analyst Ipek Ozkardeskaya perceives this is the country’s main reason to stay afloat. The energy commodity has declined 70 percent since the summer of 2014.
“I share the consensus view that producers are unlikely to reach an agreement (on cuts), the rationale being the need to satisfy two conditions”, said Ric Spooner, chief market analyst with Sydney’s CMC Markets.
The takeaway for bunker buyers should be that, while prices will likely firm as a result of today’s reaction in the oil markets, there is still massive oversupply and plenty of opportunity for prices to be swung the other way. So on Wednesday, oil ministers from the four countries went to Tehran to try to talk Iranian officials into signing on as well.
“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.
Oil prices also gained support after United States crude stocks unexpectedly fell 3.3-million barrels last week to 499.1-million, data from the American Petroleum Institute (API) showed on Wednesday.
Saadallah al Fathi, a former adviser to Iraq’s Ministry of Oil and former head of the Energy Studies Department, OPEC Secretariat, told Al Jazeera that freezing output at January’s levels was not going to immediately cut supplies.
Saudi Arabia and other OPEC producers have been refusing to reduce output in an attempt to drive less competitive players, in particular US shale oil producers, out of the market.
OPEC member Iran, Saudi Arabia’s regional arch rival, has pledged to steeply increase output in the coming months as it looks to regain market share lost after years of worldwide sanctions, which were lifted in January following a deal with world powers over its nuclear programme.
Iran’s qualified backing of an accord led by Saudi Arabia and Russian Federation to cap output sowed doubts that the agreement can succeed in tempering a record global surplus.
The agreement came after a meeting in Doha on Tuesday.
But Iran has suffered even heavier losses because the sanctions closed its access to much of the world market.