(Bloomberg) -- The search for a grand bargain among oil producers now shifts to the Iranian capital.
The spotlight that fixed Tuesday on Doha, Qatar -- where Saudi Arabia and Russia tentatively promised to freeze production in a step toward clearing the global oil glut -- is moving to Tehran. Iran and Iraq, the two OPEC nations now critical to any agreement, will meet there Wednesday with Venezuela, a broker of Tuesday’s accord.
Saudi Arabia and Russia said their commitment to cap output at January levels depends on the cooperation of other producers. While an Iraqi official said his country was prepared to back the plan, Iran’s Oil Minister Bijan Namdar Zanganeh signaled some reluctance. Freed just last month to fully restore international oil exports after three years of sanctions, Tehran will bolster supply to recoup badly needed revenues, Commerzbank AG says.
“Iran and Iraq are critical to any agreement because they are the countries with plans to boost output,” said Miswin Mahesh, an analyst at Barclays Plc in London. “Without their cooperation, any output freeze from other producers -- who are already close to the top of their bandwidth -- won’t have a major impact.”
Iran “will not forgo its share of the market,” the Oil Ministry’s news service Shana reported Tuesday, citing Zanganeh. He will meet with Iraqi Oil Minister Adel Abdul Mahdi and Venezuela’s Eulogio Del Pino, whose diplomatic tour of oil capitals from Moscow to Riyadh this month culminated in the accord announced Tuesday.
Iran, which was the second-biggest producer in the Organization of Petroleum Exporting Countries before sanctions were intensified in 2012, is seeking to boost output by 1 million barrels a day and regain market share. The nation has loaded its first cargo to Europe, while Chinese and Spanish companies have also booked shipments.
“It’s unrealistic to think that after fighting for years to be freed from sanctions on their output they will agree to sanction themselves,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt.
Iraq may be more open to halting further growth because it’s already boosted production to record levels. Output reached 4.35 million barrels a day in January, according to the International Energy Agency. It aims to pump 6 million barrels a day by the end of the decade.
Iraq’s Mahdi said on Jan. 26 the country is willing to restrain output, or even reduce it, if fellow producers decide to cut their production. An Iraqi official, who asked not to be identified, confirmed the country is prepared to join in the Doha accord.
Hailing the “historic decision” in Doha, Venezuela’s del Pino said he will keep working to stabilize the oil market and restore fair prices, according to a statement from the nation’s Ministry of Petroleum and Mines.
“If Iran and Iraq are not a part of the agreement it’s not worth much,” Commerzbank’s Weinberg said.
To contact the reporter on this story: Grant Smith in London at email@example.com To contact the editors responsible for this story: James Herron at firstname.lastname@example.org Alex Devine.
Copyright 2016 Bloomberg News.
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