Oil Prices May Not Rise, Even With Production Freeze

“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”, Mehdi Asali, Iran’s OPEC envoy, was quoted by the Shargh daily newspaper to have said on Wednesday.

Iran said on Wednesday that it would reject any effort to limit its oil output, dealing a blow to a proposal by Russian Federation and Saudi Arabia that oil exporters freeze production to bolster prices.

Iranian Oil Minister Bijan Zanganeh also indicated Tehran would not agree to freezing its output at January levels, saying the country would not give up its appropriate share of the global oil market.

Iran said in January that it planned to add to its production, stressing that the country should not be held responsible if prices continue to slide.

Venezuela faces an uphill battle convincing its Iranian counterparts to freeze production, as the Middle Eastern country recently began exporting oil after sanctions were lifted due to a nuclear deal.

Mr Zanganeh did not mention if Iran, the second-biggest Opec producer before sanctions were intensified in 2012, would deviate from plans to restore exports after the lifting of penalties last month.

The willingness to freeze oil production yielded positive results for United States’ oil which rose by almost 8 percent yesterday.

“This decision of [top oil producers] to freeze production is a publicity stunt more than anything”, said Josh Mahony, a market analyst with IG, based in London. And while it appears to have fallen apart, that it was announced alone signals just how much pain Riyadh and Moscow – the top two oil producers in the world – are feeling from the downturn in oil prices. He said the four nations that participated at the Doha gathering could stabilize oil prices on their own – if they cut their production by 2 million barrels a day.

Global oil prices plunged from $115 to less than $30 per barrel between June 2014 and January 2016, hitting their lowest levels since 2003, mostly because of prolonged global oversupply and weak demand.

Deshpande said that refineries increased their processing rate past year to take advantage of record gains in refining margins, which has led to a build-up of oil products stocks.

Analysts had expected crude inventories to climb by 3.9 million barrels in the week to February 12, according to a Reuters poll on Tuesday. Iran has said it hopes to put another 500,000 barrels a day on the market.