Iran supported an accord by Saudi Arabia and Russia to steady global oil markets by capping their supply, without announcing a reduction in production.
Iran backs any measures to stabilize global oil markets including the plan outlined by the world’s two largest crude producers Tuesday to cap output at January levels, Iranian Oil Minister Bijan Namdar Zanganehsaid after talks with fellow OPEC members Qatar, Iraq and Venezuela, according to a report from Oil Ministry news service Shana. While the deal hinges on the cooperation of Iran, Zanganeh didn’t say whether the Persian nation would deviate from plans to restore exports after international sanctions were removed last month.
“If Iran’s not part of the deal, it isn’t worth much,” said Eugen Weinberg, head of commodity markets strategy at Commerzbank AG in Frankfurt. “After fighting to end sanctions for years and finally being free of them, why Iran would choose to put sanctions on themselves by freezing their production?”
More than a year since the OPEC decided not to cut production to boost prices, oil remains about 70 percent below its 2014 peak. Supply still exceeds demand and record global oil stockpiles continue to swell, potentially pushing prices below $20 a barrel before the rout is over, Goldman Sachs Group Inc. said last week.
By merely capping supply rather than cutting it, the deal wouldn’t succeed in tackling the global oil glut, Goldman Sachs Group Inc. and BNP Paribas SA said.
Iran, which was the second-biggest producer in OPEC before sanctions were intensified in 2012, is seeking to boost output by 1 million barrels a day and regain market share. The nation should increase production by 500,000 barrels a day by March 20, the end of the Iranian calendar year, Shana reported on Wednesday, citing Roknoddin Javadi, managing director of National Iranian Oil Co.
For this oil market, different parties are standing on their own interests and now the US oil giants are coming into this cake with technology outcome of shale oil. The persistence of oversupply will likely to be continued and expectation for a cut in production for Iran is far away from consideration. This for currently signal will not help oil price and economy thrive. Shorting the oil is still the main topic around the street.