"The Freeze Is Finished" says OPEC Delegate as Iran Closes in On Pre-Sanction Output

by Ship & Bunker News Team
Thursday May 26, 2016

Despite Iran rapidly closing in on pre-sanction oil output levels – which the Islamic Republic has indicated could make it more amenable to participate in bi-lateral discussions to freeze production – at least one Organization of the Petroleum Exporting Countries (OPEC) delegate says the prospect of discussions is dead.

When asked by Reuters if the cartel will make any changes to output policy at its June 2 meeting in Vienna, a senior OPEC delegate said: "Nothing. The freeze is finished."

Another Middle Eastern delegate told the agency, "I don't think OPEC will decide anything; the market is recovering because of supply disruptions and demand recovery."

Yet another anonymous source reiterated a point that is widely viewed as the real reason why any freeze proposal is stillborn: "It really depends on those countries within OPEC with a high level of production; it does not seem that Saudi Arabia will be ready to cooperate with other members."

Reuters notes that rivalry between the Saudis and Iran, which helped found OPEC 56 years ago, has intensified due to Sunni-Shia conflicts, to the point where setting aside their differences – as they have done in the past– is highly unlikely.

As such, the best possible outcome of the Vienna talks is no outcome at all, according to analysts: "The only aspiration OPEC should have for its June 2 meeting is simply not to repeat the chaos of the Doha process," says Paul Horsnell, analyst at Standard Chartered.

He adds, "A straightforward meeting with no binding commitments and, most importantly, no overt arguments would be the best outcome for ministers."

Although the approach of the Vienna summit is causing rumours about renewed freeze talks to intensify, critics point to many reasons why such talks aren't required, case in point: Mike Rothman, founder of Cornerstone Analytics, who recently noted that demand for oil is much higher than expected and oversupply much lower, leading him to predict that $85 oil will be achieved by year-end.