EMEA News
Iran Supports Oil Price Stabilization But Has Yet to Agree to Participate in Output Freeze
Iran Wednesday declared that it supports any effort to stabilize oil prices, and sent oil prices surging as a result, but critics say it along with Saudi Arabia, Russia, Qatar, and Venezuela agreeing in principle the day prior to an output freeze is a "great disappointment" in what was oil's "last great hope."
After meeting with counterparts from Venezuela, Iraq, and Qatar in Tehran, Bijan Zanganeh, oil minister for Iran, told the Shana news agency that "This is the first step and other steps should also be taken."
Zanganeh reportedly chose his words carefully while talking to the media, to avoid stating his country's position on freezing its own output - a crucial requirement for the pact of the four countries led by Saudi Arabia and Russia to follow through on its promise to halt production at January levels.
He said, "We had a good meeting today and the report of yesterday's meeting was given to us; we support cooperation between OPEC and non-OPEC members.
"I was told that Russia as the world's biggest oil producer, Oman and other countries are ready to join: this is a positive step, we have a positive approach to it, this is a good start."
However, Mehdi Asali, Iran's OPEC envoy, was quoted on the same day as saying, "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?"
Still, following the Zanganeh meeting, Brent rose 7 percent to $34.43 per barrel and U.S. crude climbed 5.7 percent to $30.69 per barrel; this is in sharp contrast to prices dropping the day prior on news of the Saudi/Russian pact.
The takeaway for bunker buyers should be that, while prices will likely firm as a result of today's reaction in the oil markets, there is still massive oversupply and plenty of opportunity for prices to be swung the other way.
As such, a continuation of the volatility seen over the last month would not be a surprise.
Overproduction
Indeed, taking the longer view, some critics note that any freeze will do little to improve the current market imbalance: David Hufton, analyst for PVM, stated, "The market needs a cut, not a production freeze."
Julian Jessop, head of commodities research for Capital Economics, doubted the Saudi/Russian pact would play out as planned because "Moscow reportedly reneged on a similar deal in 2001, although the stakes are arguably higher now," plus Russia also failed to respect a similar agreement with Organization of the Petroleum Exporting Countries members in the 1990s.
But the most outspoken critic of the past two days' events is Dennis Gartman, founder and publisher of "The Gartman Letter," who referred to them as "the last great hope for oil."
He said, "Anybody who even thought there would be talk of a production cut had to understand, though, that the one thing [you] can know about OPEC is they cheat; they cheat on everything.
"Even if they had announced a production cut, nobody would have taken it seriously, but this was really a great disappointment."
Iran's long-promised vow to raise its crude output by 500,000 barrels per day once sanctions were lifted began playing out in January, when it cut its crude prices to Europe for February delivery.
