London, UK | – The plan to freeze oil production to push up prices seems to be falling at the first hurdle.
Islamic Republic of Iran has said it will resist the “illogical” idea even as fellow OPEC ministers went to Tehran to try to persuade the Iranians to join in.
Trying to counter low prices, the two biggest oil producers – OPEC power Saudi Arabia and non-OPEC member Russia – have said they would freeze production, but only if other big oil nations did the same.
OPEC Gulf producers – Qatar, Kuwait and the UAE – as well as Venezuela have said they would join the pact. Iraq has also made sympathetic noises.
Speaking before Wednesday’s meeting in Tehran with his counterparts from Iraq, Qatar and Venezuela, Iranian Oil Minister Bijan Namdar Zanganeh said: “What is important is that first of all, there is an excess of supply on the market and secondly Iran will not give up its share of production.”
Iranian officials are angry that while it was not able to export because of international sanctions other countries raised output pushing down prices.
Iran’s OPEC envoy, Mehdi Asali, told the Shargh daily newspaper: “Asking Iran to freeze its oil production level is illogical”
“How can they expect Iran to cooperate now and pay the price? We have repeatedly said that Iran will increase its crude output until reaching the pre-sanctions production level.”
LCG Market Analyst Ipek Ozkardeskaya said Iran is not willing to cut production having just started to increase it after sanctions were lifted: “I believe that Iran is going to be pushing and pressuring Saudi Arabia and continuing to do whatever it was planning to do before this whole setting got this dangerous. They are not going to be willing to leave the game before they start it.”
It is difficult to see what incentives the others could offer Iran to freeze its output, and as long as Tehran is not part of the deal it is meaningless.
Reflecting that crude oil prices picked up only slightly on Wednesday.