Al-Khobar – There hasn’t been a day without conflicting statements regarding OPEC production freeze agreement since last week.
Every time oil prices fall, an OPEC official would make an announcement that raises hopes and thus increasing the prices again.
The price of Brent crude has tumbled after it had surpassed the $50/barrel during the past few days. The prices rose again when an Iranian source stated that Iran is willing to participate in the meeting in Algeria next month. Thus, it gives the impression that the oil market is highly influenced by the Iranian’s statements.
Another evidence that the market is highly affected by Iranian statements is Reuters reporting a source saying Iran had not yet confirmed its participation in the meeting in Algeria.
It seems as though the market is not affected in same the manner by the statements of Iraqi PM Haidar al-Abadi who announced that Iraq hadn’t reached its full share of the oil market.
This could indicate that Baghdad would rather not freeze its production of crude oil as part of any deal reached by OPEC to raise prices.
When asked during a press conference whether the Iraqi government would welcome such an agreement, Abadi said that Iraq is still producing less than it should.
On Monday, oil prices increased 2% after Reuters reported that Iran is sending positive signs of supporting a joint OPEC movement to improve the market.
Brent crude settled up 80 cents, or 1.6 percent, at $49.96 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 69 cents, or 1.5 percent, to close at $48.10.
Since the lift-off sanctions, Iran, third-largest oil producer in OPEC had refused to attend the meeting in Qatar in April to agree on oil production freeze. No agreement had been reached especially after Saudi Arabia’s insistence on Iran’s participation in the deal.
As commodities strategist at Scotiabank, Michael Loewen noted on the unconfirmed rumors of Iran’s support for a freeze: “It’s a speculation. It’s more OPEC jawboning.”
Goldman Sachs Group Inc. believes that even if OPEC and some producers from outside the group agree to freeze output, it would only be “self-defeating” because it would benefit other suppliers.
An output cap would likely prove counterproductive for OPEC if it led to further price gains and an increase in supply from other producers.
Sachs ruled out any possible current agreements given that Libya, Iraq and Nigeria, all suffer from severe supply disruptions and had started to show signs of willingness to increase production.
Goldman Sachs maintained a “weak” $45-$50 price forecast through the 2017 summer.
Reuters reported sources in OPEC saying that Tehran appeared more willing to support such talks with other oil producers.
A source familiar with Iranian thinking said: “Iran is reaching its pre-sanctions production level soon and after that it can cooperate with the others.”
Sources also reported that talks between Riyadh and Tehran and still ongoing and there are still many questions regarding the freeze.