After Russia and several top OPEC nations, including Saudi Arabia and Qatar, announced a general agreement to freeze oil production, sights shifted to Tehran to see if the proposal had any chance of survival.
Oil ministers from Iraq, Qatar, and Venezuela traveled to Tehran on Wednesday to see if they could bring their Iranian counterpart on board. Iran was always going to be the heaviest lift for any agreement since it only recently emerged from several years of sanctions and international isolation. Now, with sanctions lifted, Iran argues it has every right to regain lost ground. Related: Historic OPEC-Russia Agreement Will Have Minimal Impact
Things did not look good heading into Wednesday’s meeting. "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." Iran's representative to OPEC was reported to have said prior to the meeting. "How can they expect Iran to cooperate now and pay the price?" he added. "We have repeatedly said that Iran will increase its crude output until reaching the pre-sanctions production level."
The talks lasted around three hours and the visiting oil ministers left without comment. But Iran’s oil minister Bijan Zanganeh emerged from the meeting surprisingly upbeat. At a news conference at 1500 GMT, he welcomed the deal, and issued support for the OPEC and non-OPEC production freeze, arguing that it should be the first step. Related: OPEC Ups Pressure On Iraq, Iran To Freeze Production
Notably absent, however, was any comment on whether or not Iran would freeze its own production. Without explicitly saying that Iran would sign on to a production freeze, the likely implication is that it will not, at least for now.
For their part, oil traders reacted positively – WTI and Brent were up more than 4 percent and 5 percent, respectively, following his comments. It remains to be seen if the rally can be sustained, especially if Iran moves forward with ramping up production.
By Charles Kennedy of Oilprice.com
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