IEA Joins the Legion of Freeze Output Critics, Calls the Proposal "Meaningless"

Neil Atkinson  says only Saudi Arabia has any ability to increase its production

Neil Atkinson, head of the oil industry and markets division for the International Energy Agency (IEA), has dismissed the impending output freeze meeting spearheaded by some Organization of the Petroleum Exporting Countries (OPEC) members and Russia as "meaningless."

Speaking at an industry event, Atkinson remarked that "Amongst the group of countries [participating in the meeting] that we're aware of, only Saudi Arabia has any ability to increase its production, so a freeze on production is perhaps rather meaningless.

"It's more some kind of gesture which perhaps is aimed … to build confidence that there will be stability in oil prices."

Atkinson is the latest in a long list of freeze critics, which includes Julian Lee, oil strategist for Bloomberg First Word, who called the freeze "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" and warned that oil prices will plummet again; 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 argues that a freeze "won't eliminate near-term global oversupply."

Atkinson's comments are also supported by colleague Fatih Birol, executive director for the IEA, who recently told Bloomberg Television that declines in U.S. shale output are contributing more to the rise in oil prices than talks, and that if a freeze was agreed upon "it would be unexpected that it would have major implications, at least in the first half of 2016."

But Atkinson also had good news to deliver, in the form of his contention that "the worst is over for [crude] prices … Today's prices may not be sustainable at exactly $40 a barrel, but in this mid-$30s and upward range, we think there will be some support unless there's a major change in fundamentals." 

Meanwhile, Libya has joined Iran in refusing to participate in the April 17 meeting in Doha, causing The Guardian to speculate that the absence of the two OPEC producers, "both with ample room to increase output, would limit the impact of any success in broadening the freeze."

Earlier this week, a senior OPEC delegate gave strong indications that Saudi Arabia may join the proposed freeze without Iran's participation, and that this turn of events might lead to bigger initiatives down the road.