Saudi Arabia, Russia, Qatar, Venezuela Agree to Oil Output Freeze

Analysts say the initiative will have little or no effect.

Although Saudi Arabia and Russia agreed on Tuesday to freeze their output in a bid to stop the global oil price slide, analysts say the initiative will have little or no effect.

That's because, according to Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, production in the world's two biggest oil producing nations hasn't grown of late and showed no signs of increasing further anyway.

Also, "If Iran and Iraq are not a part of the agreement, it's not worth much - and even then there is still a question of compliance," said Weinberg.

Qatar and Venezuela have also agreed to freeze production at January levels, but only if other oil-producing countries follow suit.

Ali al-Naimi, oil minister to Saudi Arabia, told reporters, "The reason we agreed to a potential freeze of production is simple: it is the beginning of a process which we will assess in the next few months and decide if we need other steps to stabilize and improve the market."

He added: "We don't want significant gyrations in prices. We don't want a reduction in supply. We want to meet demand. We want a stable oil price."

Unlike the outcome of earlier rumoured output agreements between Organization of the Petroleum Exporting Countries (OPEC) members, the oil markets responded negatively to the proposed freeze: gains made over the past week were wiped out as West Texas Intermediate crude fell 1.4 percent to $29.04 and Brent crude slipped 3.6 percent to $32.18.

Meanwhile, Iraq in its fight against the Islamic State boosted production to a record 4.35 million barrels per day; and Bijan Zanganeh, oil minister for Iran, said his country will continue with plans to double exports in order to regain its pre-sanctions share of the global market – although he conceded that the freeze requires "discussion and examination."

Mohammed al-Sada, Qatar's minister of energy and industry, says "intensive communication" with these countries and other OPEC members will start "straight away," and Eulogio del Pino, oil minister for Venezuela, will meet with Iraqi and Iranian oil officials on Wednesday in Tehran.

The freeze falls short of the production cuts many members had been calling for and which Phillip Futures earlier this week said would also do little good, because they "would only give more expensive forms of production more room to breathe and would only solve the problem in the short term."