Iran talks on output freeze under way

Representatives of Russia, Qatar, Venezuela and Saudi Arabia have agreed to freeze oil production at the level of January 11 at a meeting in Doha, if other manufacturers join the initiative.

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 worldwide sanctions had been imposed.

But analysts are skeptical about Iran’s willingness to freeze production at a time when the country is eager to ramp up output and reclaim its share of the world’s oil market.

Iran supported an accord by Saudi Arabia and Russian Federation to steady global oil markets by capping their supply, without saying whether it would curb its own production.

Iran’s Oil Minister Bijan Zanganeh has been joined by Iraqi counterpart Adil Abdul-Mahdi, Venezuelan Oil Minister Eulogio Del Pino and Opec president and Qatari Minister of Industry & Energy Mohammed bin Saleh al-Sada at the Tehran gathering.

Meanwhile, 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 worldwide sanctions on its petroleum sector have been eased as part of the accord limiting its nuclear program.

Brent crude was up $1.92 at $34.08 a barrel by 1556 GMT.

Sanctions cut Iran’s output to around 1.1m barrels per day, from 2.5m barrels per day before 2012.

However, Iranian newspaper Shargh quoted the country’s OPEC envoy Mehdi Asali as slamming the move. While we hope that Iran and Iraq are on board with this plan, we think it will be tough to get them to agree after the lifting of sanctions on Iran and as Iraq still recovers from years of conflict.

Brent for April settlement slid $1.21, or 3.6 percent, to $32.18 a barrel on the London-based ICE Futures Europe exchange on Tuesday.

The commodity had enjoyed a surge from Friday to early Tuesday as Moscow and Riyadh – the world’s two biggest producers – prepared for talks on a rout that has seen the cost of a barrel collapse and hammered global markets.

But soon after the formal announcement of the agreement, there was a sharp reversal in oil prices as many soon realized the deal may not remove a significant number of barrels from the market. “It could mark the beginning of further cooperation between OPEC and other producers to improve the situation in the oil market”, the Minister said.

The price of oil began falling in mid-2014 as surging output from OPEC, Russia and US shale producers outpaced demand.