Why Saudi Arabia’s oil output freeze won’t boost prices

‘The deal doesn’t add much to rebalance the market, but it is still important that the parties talk.

Shana quoted Zanganeh as saying other oil ministers understand Iran’s special situation.

Oil prices were up at the opening of trading on Wednesday morning on the false hope that OPEC would succeed in getting Iran to agree to a cap on oil production.

Iran exported around 2.5 million barrels per day (bpd) of crude before 2012, but sanctions, imposed by world powers to curb Tehran’s nuclear program, cut its oil shipments to about 1.1 million bpd.

Iranian Oil Minister Bijan Zanganeh met counterparts from Venezuela, Iraq and Qatar in Tehran for over two hours on Wednesday, saying the proposed production “ceiling” should be the first step toward stabilizing the market.

Oil ministers from the OPEC (Organisation of Petroleum Exporting Countries) held discussions in Tehran Wednesday to talk about a possible production freeze between global Oil producers.

The comments by Zanganeh revived memories of the last OPEC meeting in December which ended without a decision after Zanganeh said he rejected any plan to curtail Iran’s production before it rises to pre-sanction levels.

“A freeze is not the same as a cut, and somewhat disingenuously, keeping crude production at January levels actually implies higher-than-expected annual output … and [that] can hardly tackle the current market oversupply”, JBC Energy said in a note.

The four agreed to freeze their average monthly oil output throughout 2016 at January levels if other countries followed suit.

The world is awash with oil. U.S. crude stockpiles are forecast to have increased by 3.5 million barrels last week, according to a Bloomberg survey before government data Thursday. Whereas a barrel went for as much as $115 (103 euros) in mid-2014, it recently dropped below $30.

Iranian officials are angry that while it was not able to export because of worldwide sanctions other countries raised output pushing down prices.

Brent futures added 42c to $34.92 a barrel by 4.09am GMT, having closed 7.2% higher in the previous session after hitting an intraday high of $34.99.

“I believe that Iran is going to be pushing and pressuring Saudi Arabia and, you know, continuing to do whatever it was planning to do before this whole setting got this risky”. “Most of the major oil producing nations are willing to freeze their oil output and if this is backed up by evidence in the coming months then we could be seeing the light at the end of the tunnel soon”, said Forex.com analyst Fawad Razaqzada.