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Saudi Arabia and Russia agree to freeze oil output

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DOHA: Weary of the continuous weakening of oil prices the top oil exporters Russia and Saudi Arabia agreed on Tuesday to freeze output levels but said the deal was contingent on other producers joining in.

Saudi oil minister Ali al-Naimi said freezing production at January levels – near record highs – was an adequate measure and he hoped other producers would adopt the plan, however, Venezuelan oil minister Eulogio Del Pino said more talks would take place with Iran and Iraq on Wednesday in Tehran.

“We don’t want significant gyrations in prices, we don’t want a reduction in supply, we want to meet demand, we want a stable oil price. We have to take a step at a time,” Naimi told reporters.

Oil prices jumped to $35.55 per barrel after the news about the secret meeting but later pared gains to trade below $34 on concerns that Iran may reject the deal.

OPEC member Iran, Saudi Arabia’s regional arch-rival, has pledged to steeply increase output in the coming months as it looks to regain market share lost after years of international sanctions, which were lifted in January following a deal with world powers over its nuclear program.

“Our situation is totally different to those countries that have been producing at high levels for the past few years,” a senior source familiar with Iran’s thinking told Reuters.

Iranian oil minister Bijan Zanganeh also indicated Tehran would not agree to freeze its output at January levels, saying the country would not give up its appropriate share of the global oil market.

The fact that output from OPEC kingpin Saudi Arabia and non-OPEC Russia – the world’s two top producers and exporters – is near record highs complicates any agreement since Iran is producing at least 1 million barrels per day below its capacity and pre-sanctions levels.

However, two non-Iranian sources told British news agency that Iran may be offered special terms as part of the output freeze deal. “Iran is returning to the market and needs to be given a special chance but it also needs to make some calculations,” said one.

Analysts are of the view that as not all the OPEC members signed up to the deal so compliance may be an issue. Capital Economics’ analyst Jason Tuvey said that “The agreement (if successful) should support oil prices but there are reasons to be cautious. Not all OPEC members have signed up to the deal – notably Iran and Iraq. History would also suggest that compliance may be an issue.”

 

 

M M Alam

M. M. Alam is a Pakistan-based working journalist since 1981. Karachi University faculty gold medalist Alam began his career four decades ago by writing for Dawn, Pakistan’s highest circulating English daily. He has worked for region’s leading publications, global aviation periodicals including Rotors (of USA) and vetted New York Times as permanent employee of daily Express Tribune. Alam regularly covers international aviation and defense-related events including Salon Du Bourget (France), Farnborough (United Kingdom), Dubai (UAE). Alam has reported thousands of events and interviewed hundreds of people in Pakistan, UAE, EU, UK and USA. Being Francophone Alam also coordinates with a number of French publications.