Iran gingerly offered some support for an oil production freeze earlier this week — without actually agreeing to join one.
Since the lifting of sanctions, Iran has taken a hard stance against any production freeze, a position that ultimately ended up being a major reason for Saudi Arabia bailing on the Doha meeting back in April.
However, on Tuesday, Iran’s oil minister Bijan Zanganeh seemed to suggest that he’d support measures keeping prices around $50-$60 a barrel.
“Iran wants a stable market and therefore any measure that helps the stabilisation of the oil market is supported by Iran,” Zanganeh said after a meeting with OPEC secretary-general Mohammed Barkindo, according to Reuters.
This comment came one day after Saudi Arabia and Russia’s agreement at the G-20 summit in China to cooperate on oil and to create a “working group” to stabilise markets, and just weeks ahead of the informal oil talks to be held in Algiers on September 26 and 27.
“We believe that the sovereign producers could come to conclude in Algiers that they have little to lose by capping output when they are close to maxing out,” argued the RBC Capital Markets team, headed by Helima Croft, in a note to clients.
“While the Saudi-Iranian regional rivalry could still upend the talks, we contend that these countries have the capacity to opt for pragmatism in order to secure some financial relief.”
Still, on Wednesday, the director for international affairs at state-run National Iranian Oil Co., Mohsen Ghamsari, said that Iran would be ready to decide on capping production only after its output hit pre-sanctions levels, which would amount to just over 4 million barrels a day, according to Bloomberg. It currently produces around 3.8 million barrels a day.
And on Monday, Khalid al-Falih, Saudi Arabia’s oil minister, dismissed the need for a production freeze, leading analysts to wonder whether the Saudi-Russia agreement on oil cooperation would actually amount to anything.
Some oil watchers have
argued that the recent talk might not necessarily translate into action.
“While recent rhetoric suggests a freeze deal has a fighting chance, on the ground realities make this outcome far from certain, in light of worsening geopolitical tensions within OPEC, too many members production below current and/or aspirational capacity, and demand concerns if prices are driven too high, too fast,” argued a Macquarie Research team led by Vikas Dwivedi.
“Even if a ‘freeze’ truly materialises, it will provide little fundamental impact. From a longer-term perspective, core OPEC and non-OPEC producers are eyeing $50+ levels to enable future growth,” he added.
“Thus, instead of a meaningful rapprochement among key producers, a ‘freeze’ may merely represent an opportunity to ‘reload’ only to resume oil market hostilities.”
Prices for Brent Crude oil, the international benchmark, are up 3.6% at $49.70 a barrel as of 12:36 p.m. ET.
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