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Oil price near $32 as investors look forward to Iraq and Iran joining the plan to freeze output
Wednesday, 17 February 2016 11:53 (Ecofin Agency) - Brent oil on Wednesday traded near $32 as shareholders wait to see if Iraq and Iran will cooperate with plans by Saudi Arabia and Russia to freeze production at January levels.
Saudi’s Oil Minister Ali Al-Naimi had said that the deal to freeze production at January levels is the start of a process that will involve other moves to stabilize and improve the market.
“Iraq and Iran are the two countries that are going to contribute to growth from the OPEC nations this year. Getting an agreement from these is going to be very difficult, particularly in the case of Iran. I wouldn’t expect oil to breach $40 until we get into the second half of the year, that’s simply because we’re massively oversupplied,” Richard Gorry, managing director at JBC Energy Asia in Singapore, said.
Oil fell near 25 % since the Organization of Petroleum Exporting Countries (OPEC) abandoned production targets at a meeting in early December 2015. Iran before sanctions were intensified in 2012, is seeking to boost production by one billion barrels a day and regain market share after penalties were lifted. The nation has loaded its first cargo to Europe, while Chinese and Spanish companies have also booked shipments.
“Iran will not forgo its share of the market,” Bijan Namdar Zanganeh had said on Tuesday. The country produced 2.86 million bpd in January, making it the fifth-biggest producer in OPEC.
According to an official, Iraq is prepared to join Saudi Arabia in freezing or cutting production, if others members pledge to the agreement.
Venezuela, which plans to join the deal with Qatar, has urged exporters including Russia, Iran and Saudi Arabia to organize a meeting between OPEC members and other suppliers so as to arrive at an agreement to balance the market.
The decline in oil prices is affecting producers as well as economies globally. Oil majors have reduce workforce and several countries that rely strongly on oil revenue are reinforcing their resources so as to bear the revenue drop, Business Post reports.
Anita Fatunji
