EMEA News
No Chance of Output Freeze Under "Comatose" OPEC Leadership: Analysts
In what analysts say is an entirely predictable replay of events that led up to the scuttled Doha talks to freeze production rates, Iran has reiterated that it won't cooperate in the rumoured upcoming freeze discussions at the Organization of the Petroleum Exporting Countries' (OPEC) annual meeting in Vienna on June 2.
Moreover, 26 of 27 analysts surveyed by Bloomberg are convinced the cartel will stick to Saudi Arabia's strategy of pumping at near-record volumes rather than setting an output target.
Rokneddin Javadi, deputy oil minister for Iran, told Mehr news agency over the weekend that "Under the present circumstances, the government and the oil ministry have not issued any policy or plan to the National Iranian Oil Company towards halting the increase in the production and exports of oil."
Instead, the Islamic Republic will continue on its path of boosting oil exports to pre-sanction levels, and Javadi reports that crude exports, excluding gas concentrates, "have reached 2 million barrels per day; Iran's crude oil export capacity will reach 2.2 million barrels by the middle of summer."
Meanwhile, although the Saudis' plan to squeeze U.S. shale producers with sky-high output was opposed by most OPEC members when it was introduced in 2014, the analysts surveyed by Bloomberg acknowledge that it is finally paying off, which further makes any prospect of a freeze deal in Vienna unlikely.
Mike Wittner, head of oil-market research at Societe Generale SA, remarked, "The strategy is in the process of working - I don't think they have much incentive to particularly do anything."
Even if that weren't the case, Wittner points out that rivalry between the Saudis and Iran would doom any freeze discussions, as they did at Doha.
Still, as far as Eugen Weinberg, head of commodities research at Commerzbank AG, is concerned, the policy of letting members produce as much as they want with no coordination calls into question the cartel's fundamental reason for being.
He said, "The question is, is OPEC dead or just in a coma?"
The list of analysts who insist the basic concept of a freeze is meaningless in the face of massive overproduction is lengthy and includes Julian Lee, oil strategist for Bloomberg First Word, who called the first freeze proposal "an empty gesture" because none of the participating countries were expected to raise production anyway; CNBC analyst Jim Cramer, who called the proposal "a total hoax"; David Hufton, analyst for PVM, who stated that "the market needs a cut, not a production freeze"; and Giovanni Staunovo, an analyst at UBS Group AG, who argued that a freeze "won't eliminate near-term global oversupply."
