Oil prices seesawed once again after Iran gave some faint hope that it will join Saudi Arabia, Russia, Qatar, and Venezuelato freeze oil production at January levels.
Following a meeting with OPEC ministers, the Iranian oil minister Bijan Zanganeh told the state news agency Shana, cited by various media outlets including The Financial Times, that “Iran backs any measures which help stabilise the market and improve the price of crude oil.”
Oil prices are now back at at over $31 per barrel — a whole 2% higher than when Iran delivered a more aggressive statement over the production freeze hours earlier.
Initially Iran’s OPEC envoy, Mehdi Asali, said:
“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. How can they expect Iran to cooperate now and pay the price?”
It caused the oil price plunge to below $30 per barrel but with the renewed comments from Zanganeh, it looks like investors are holding out for a change of heart.
Basically, the markets would be happier if Iran joined the countries in pledging to put their output levels on ice because after years of sanctions, the oil-rich country have ramped up its production and are already massively pumping oil into the over-supplied market.
The International Energy Agency said in its latest oil market report that OPEC memberspumped out 280,000 more barrels every day in January than in December, helped largely by Iran’s re-entry into the global markets after the lifting of sanctions that month.
Iran has only just had its sanctions liftedand it is not looking at reducing the amount it can produce while it is trying to rebuild its battered economy with lucrative oil reserves. Oil production constitutes 23% of Iran’s wealth, according to Trading Economics.
This week, Jonathan Aronson and his team at Credit Suisse warned that oil prices could tumble further if Iran does not rein in its output levels (emphasis ours):
In this view, a freeze of production is not a ‘confidence builder’ but an admission that despite the historic collapse of oil prices the sovereign producers cannot find enough common ground. For instance, Iran reiterated that it intends to grow its output back to pre-sanctions level.
Business Insider Emails & Alerts
Site highlights each day to your inbox.