Oil producers address glut in supply

“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”. Saudi Arabia dominates policy-making within the 13-member bloc of oil producing countries, which has refused to cut its official production targets.

“The state of Kuwait welcomes the Doha agreement… and affirms its compliance to freeze production at January level which is conditional to the commitment of major producers from Opec and non-Opec members”, acting oil minister Anas al-Saleh said in a statement.

“I don’t think it will have a huge impact on supply and demand balances, simply because we were oversupplied in January anyway”.

The move is an attempt to stop additional supplies in a bid to shore up oil prices which have dived more than 70% since mid-2014.

The decision followed an unexpected closed-door meeting involving the four countries in the Qatari capital, Doha, and reflects growing concern among big producers about the effects the slump poses to their domestic economies.

“The reason we agreed to a potential freeze of production is simple: it is the beginning of a process which we will assess in the next few months and decide if we need other steps to stabilise and improve the market”, Mr Naimi told reporters.

Adding to the pressure on prices is the resumption of Iranian oil exports this year after worldwide sanctions linked to its nuclear programme were eased by world powers.

Saudi Arabia and Russian Federation, the world’s two largest crude producers, as well as Qatar and Venezuela, agreed to participate.

“Iran’s absence from the meeting means overall OPEC output should still rise”, CMC Markets analyst Jasper Lawler said in a note. If these countries, including Iran and Iraq, agree to the proposal, it will be implemented, he said. “Saudi oil production remains close to record highs” of more than 10 million barrels a day.

“Iran wants to produce even more to export higher volumes to Asia and Europe”, he added.

The aforementioned producers are set to maintain January’s production levels.

“We recognise today the supply is going down because of current prices. As such, the upside potential in oil prices is limited”.

“There is already too much oil on the market”, Fathi said.