Business

Oil prices recover ahead of Iran-Iraq talks

Share

He said the four countries that agreed on the oil production freeze could stabilize oil prices on their own, if they cut their production by 2 million barrels a day.

Saudi Arabia, RussiaQatar and Venezuela agreed on Tuesday to cap output at January levels if other oil producers join them.

Saudi Arabia and other OPEC producers have been refusing to reduce output in an attempt to drive less competitive players, in particular US shale oil producers, out of the market. While the news seems like a positive step toward lifting the price for crude oil, Iran remains a key obstacle to ensuring that production levels are brought in line with global demand.

Their talks started at around 1100 GMT, according to Iran's oil ministry news service, Shana.

The sanctions, imposed over Iran's disputed nuclear program, were lifted last month after an agreement with world powers, allowing Tehran to resume selling its oil freely in world markets.

The fate of the first global oil deal in 15 years could be decided on Wednesday when OPEC members travel to Iran to persuade the country to participate in a deal to freeze output levels, possibly by offering Tehran special terms.

That in turn has hurt oil-dependent government budgets, particularly in Russian Federation and Venezuela.

Iran used to export 2.3 million barrels a day, but it has been limited to one million barrels a day since 2011.

It caused the oil price plunge to below $30 per barrel. Iran has said it hopes to put another 500,000 barrels a day on the market. "We have repeatedly said that Iran will increase its crude output until reaching the pre-sanctions production level".

That may not sound like much reason for celebration, but Iran's expression of support for a multinational plan to restrain oil output was enough to give the energy market a boost.

Analysts are skeptical about Iran's willingness to freeze production at a time when the country is eager to ramp up output and reclaim its share of the world's oil market.

The pact to freeze production marks a shift in Saudi oil policy.

The announcement marks a major reversal for Saudi Arabia, which has consistently rejected calls to cut production, a policy that has been a major driver behind the collapse of oil prices from as high as US$115 18 months ago to as low as US$27 a barrel earlier this month.

 

"Any agreement will still be contingent on Iran being able to increase market share or increase production from current levels", said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London.

Share