DOHA – A deal to freeze oil output by OPEC and non-OPEC producers fell apart on Sunday after Saudi Arabia demanded that Iran join in despite calls on Riyadh to save the agreement and help prop up crude prices.
The development will revive oil industry fears that major producers are embarking again on a battle for market share, especially after Riyadh threatened to raise output steeply if no freeze deal were reached.
Some 18 countries, including non-OPEC Russia, gathered in the Qatari capital of Doha for what was expected to be the rubber-stamping of a deal – in the making since February – to stabilize output at January levels until October 2016.
But OPEC’s de facto leader Saudi Arabia told participants it wanted all OPEC members to take part in the freeze, including Iran, which was absent from talks.
Tehran had refused to stabilize production, seeking to regain market share after the lifting of Western sanctions against it in January.
After five hours of fierce debate about the wording of a communique – including between Saudi Arabia and Russia – delegates and ministers announced no deal had been reached.
“We need more time to reach an agreement among all OPEC members and main producers to freeze production, which can be by June,” one OPEC source said.
The prospects of a comprehensive deal, which would be the first between OPEC and non-OPEC countries in 15 years, looked slim.
“I am not sure you can call it a freeze,” one OPEC source said.
A senior oil industry source said: “The problem now is to come up with something that excludes Iran, makes the Saudis happy and doesn’t upset Russia.”
Failure to reach a global deal would signal the resumption of a battle for market share between key producers and likely halt a recent recovery in prices.
“If there is no deal today, it will be more than just Iran that Saudi Arabia will be targeting. If there is no freeze, that would directly affect North American production going forward, perhaps something Saudis might like to see,” said Natixis oil analyst Abhishek Deshpande.
SUPPLY GLUT
Brent oil LCOc1 has risen to nearly $45 a barrel, up 60 percent from January lows, on optimism that a deal would help ease the supply glut that has seen prices sink from levels as high as $115 hit in mid-2014.
Saudi Arabia has taken a tough stance on Iran, the only major OPEC producer to have refused to participate in the freeze.
Deputy Crown Prince Mohammed bin Salman told Bloomberg that the kingdom could quickly raise production and would restrain its output only if Iran agreed to a freeze.
Iran’s oil minister Bijan Zanganeh said on Saturday OPEC and non-OPEC should simply accept the reality of Iran’s return to the oil market: “If Iran freezes its oil production … it cannot benefit from the lifting of sanctions.”
Although a freeze would be a significant step for oil producers, it would have only a limited impact on global supply and the market is unlikely to rebalance before 2017, the International Energy Agency said on Thursday.
[Source:- Reuters]
