Top oil exporters, Russia and Saudi Arabia agreed on Tuesday to freeze output levels to tackle the growing oversupply of crude oil so as to stabilise the oil price. The deal however is dependent on other producers joining.
The announcement was made following a meeting of oil ministers from Saudi Arabia, Russia, Venezuela and Qatar in Doha, with meetings with Middle East oil powerhouses Iran and Iraq said to be imminent. The outcome of today’s meeting with Iran and Iraq is being awaited with bated breath as more talks are to take place in Tehran today, however fears of Iran ramping up production are high.
The ministers of the four countries said they would keep production at January levels, but only if other oil-producing countries also agreed to do so.
Oil prices LCOc1 jumped to $35.55 per barrel following the news about the secret meeting but dropped to near $33 on concerns that Iran may reject the deal and that even if Tehran agreed it would not help ease the growing global glut.
If the deal is successful this could become the first joint OPEC and non-OPEC deal in 15 years, aimed at tackling a growing oversupply of crude and helping prices recover from their lowest in 12 years.
Following the meeting, Saudi Oil Minister Ali al-Naimi stated, “Freezing now at the January level is adequate for the market. We don’t want significant gyrations in prices, we want to meet demand. We want a stable oil price.”
However, with Iran (Saudi’s arch-rival) already stating its intend to significantly ramp up production following the lifting of international sanctions, it is difficult to gauge the appetite for a similar commitment to freezing output in Tehran. Iran is seeking to regain its market share in the oil market which was lost after years of international sanctions over its nuclear program.
“Our situation is totally different to those countries that have been producing at high levels for the past few years,” a senior source familiar with Iran’s thinking told Reuters.
Iranian Oil Minister Bijan Zanganeh also indicated Tehran would not agree to freeze its output at January levels, saying the country would not give up its appropriate share of the global oil market.