Iran says urging Tehran to freeze oil output raise ‘illogical’

The Doha accord was likely a token gesture from Saudi Arabia to Venezuela, which faces “deep financial pain” from oil’s slump and has lobbied hard for any agreement that will support prices, Tchilinguirian said.

Brent for April settlement increased US$2.32, or 7.2 per cent, to US$34.50 a barrel on the London-based ICE Futures Europe exchange on Wednesday.

Speaking to reporters following a joint meeting among ministers of oil and energy of Iran, Iraq, Venezuela, and Qatar here on Wednesday, he said, “Today we had a good meeting and the report of yesterday’s meeting (in Doha) was presented”.

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.

Now, he added, how can those same countries expect Iran to be cooperative and to pay the price. Iran’s production has taken a hit amid sanctions, many of which have now been lifted following its landmark nuclear deal with the United States. “We look forward to the start of cooperation between OPEC and non-OPEC countries”, he was quoted as saying by the oil ministry’s news service, Shana.

A freeze is not a cut, and keeping Crude Oil production at January levels implies higher-than-expected annual output, insuring continuing market oversupply and lower prices.

The Islamic Republic’s OPEC envoy Mehdi Asali said: “Asking Iran to freeze its oil production level is illogical”, according to Iranian newspaper the Shargh.

The fact that output from Saudi Arabia and Russian Federation is near record highs complicates any agreement since Iran is producing at least 1 million barrels per day below its capacity and pre-sanctions levels.

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

The pact to freeze production marked a shift in Saudi oil policy.

Oil has collapsed from levels above $100 a barrel seen in mid-2014 due to excess supply, in a slide that deepened after the Organization of the Petroleum Exporting Countries later that year dropped its policy of cutting supply to boost prices.

Iran used to export 2.3 million barrels per day but its crude exports fell to 1 million in 2012. For months, as oil prices have plunged, Riyadh had refused to curb its production in an attempt to force other oil producers, especially USA shale oil producers, out of the market.

The Iranian minister further emphasized that his Venezuelan, Qatari and Iraqi counterparts also agreed that there needs to be mechanism to monitor the conditions of the market as well as its behavior.