Renewed oil price hopes after OPEC Russia pact on freezing oil production rates at January 2016 levels, although not all members are onboard.
The agreement was finalised Tuesday after a day long meeting held by the Qatari’s in Doha with representatives from Saudi Arabia, Venezuela and non-OPEC Russia.
Commenting on the deal Saudi Arabian oil minister, Ali al-Naimi, said: “Freezing now at the January level is adequate for the market. We don’t want significant gyrations in prices, we want to meet demand. We want a stable oil price.”
Renewed Oil Price Hopes
The news has been taken with caution so far across international markets, as the deal now needs to be sold to the remanning members of OPEC whilst other non-OPEC members are expected to follow with similar measures.
Any sign of a disagreement between either OPEC or non-OPEC producers could see the deal come crushing down and the ongoing oil arms race continue.
OPEC Russia Pact
The main players in the agreement are Russia and OPEC’s de facto head Saudi Arabia, both rivals politically but brought together by Venezuela’s oil minister, Eulogio Del Pino; who himself has been touring oil producing nations over recent weeks trying to broker a deal on reducing the world’s growing oil production.
Venezuela & Saudi Arabian Oil Ministers, Eulogio Del Pino (l) Ali al-Naimi (r) Meet
He said: “We have reached a historic deal for Venezuela and other countries in favour of market stabilisation.”
However, one notable absence was that of Iran, both a major player within OPEC, but also a bitter rival politically with Saudi Arabia.
Iranian Oil Production
Iran sees much of the recent talks as an ongoing attempt to weaken its own economy, especially with rivals Saudi Arabia at the helm of OPEC and the US on international trade.
Having recently negotiated the end to its own decade long sanctions Iran now looks to up its oil production as it attempts to drag itself back from the brink economically.
In an interview with Iranian media shortly after the pact was announced; Iran’s envoy to OPEC, Mehdi Asali, made clear he had other ideas.
Mr Asali said: “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 co-operate now and pay the price?”
Iranian OPEC Envoy Mehdi Asali
Mr Zangeneh said: “We support any form of dialogue and cooperation with OPEC member states, including Saudi Arabia,”
Pushed for his thoughts on the reasons behind the global oil glut and why it stubbornly refuses to rebalance itself, Mr Zangeneh pointed at political reasoning.
“If there were a strong political will, the price of oil would have been balanced within one single week,”
“None of the oil producers is happy with the existing prices, which will harm suppliers in the long term.”
Iranian Oil Minister Bijan Zangeneh
The neutral Venezuelan oil minister, Eulogio Del Pino, is now expected to travel to Tehran in a bid to broker a deal and get Iran onboard.
It’s expected that if Iran does come to an arrangement, on holding back production, some form of financial package will be required from to sweeten the deal.
So where does this put the ever-growing global oil glut and the ever declining global oil price? We’ll according to many analysts- nowhere.
Political experts will point out that the deal is shaky at best, has no real foundation beyond a verbal agreement; and in any case last time similar attempts were made back in 2001, Russia continued to up its own production anyway.
Energy experts will point out that having four or five nations freezing production will make little difference, and will further point out that January 2016 was a production glut!
Added on top is the layer of under the radar political gaming by the Middle East neighbours Iran and Saudi Arabia; both bitter rivals, both backed by producers Iran and the US respectively and both on opposing sides of the ongoing war in Syria.
So where does this put the global price of oil? Exactly where it was in January.