Saudi-Iran Tensions Scupper Deal To Freeze Oil Output
DOHA, April 17 (Reuters) - 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.
Iran is also pledging to ramp up production following the lifting of Western sanctions in January, making a compromise with Riyadh almost impossible as the two fight proxy wars in Yemen and Syria.
Some 18 oil nations, 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 stabilise output at January levels until October 2016.
But OPEC's de facto leader Saudi Arabia told participants it wanted all members of the Organization of the Petroleum Exporting Countries to take part in the freeze, including Iran, which was absent from the talks.
Tehran had refused to stabilise production, seeking to regain market share post-sanctions.
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 concluded we all need time to consult further," Qatar's energy minister Mohammed al-Sada told reporters. Several OPEC sources said if Iran agreed to join the freeze at the next OPEC meeting on June 2, talks with non-OPEC producers could resume.
Russian oil minister Alexander Novak called the Saudi demand "unreasonable" and said he was disappointed as he had come to Doha under the impression that all sides would sign the deal instead of debating it.
Novak said Russia was not shutting the door on a deal but the government would not restrain output for now.
Russia is a key ally of Iran and has been defending Tehran's right to raise output post-sanctions while also supporting the Islamic Republic in many of its conflicts with Riyadh.
Tough Saudi Stance
The failure to reach a global deal could halt a recent recovery in oil prices.
"With no deal today, markets' confidence in OPEC's ability to achieve any sensible supply balancing act is likely to diminish and this is surely bearish for the oil markets, where prices had rallied partly on expectations of a deal," said Natixis oil analyst Abhishek Deshpande.
In December, OPEC failed to agree on output policy for the first time in years after Iran disagreed over a production ceiling proposed by Saudi Arabia, arguing again that it wanted to boost output post-sanctions.
"Without a deal, the likelihood of markets balancing is now pushed back to mid-2017. We will see a lot of speculators getting out next week," said Deshpande, who added that prices could fall close to $30 per barrel.
Brent oil 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.
Amrita Sen of Energy Aspects said oil prices could fall below $40 on Monday in a knee-jerk reaction.
"While today's lack of a freeze deal has no negative impact on balances - since Iran is really the only country likely to raise output substantially - it has a huge negative impact on sentiment especially as the deal had been hyped up so much," she said.
Gary Ross, the founder and executive chairman of New York-based consultancy PIRA, said the failure to reach a deal was negative but would not have a long-lasting impact.
"The market has recently moved up due to tightening balances. We see geopolitical risks to supply rising, we see U.S. production declining. In many respects, the rebalancing has already started," he said.
Saudi Arabia has taken a tough stance on Iran, the only major OPEC producer to refuse to participate in the freeze.
12
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Weatherford CEO's Rebound Plan Relies On Getting Smaller
- Iran Says Oil Market Is Too Tight For US Zero Exports Target
- China's Squeezed 'Teapots' Eye Petchem Path To Riches
- Baker Hughes: US Drillers Add Oil Rigs For Second Week In Three
- Venezuela Hands China More Oil Presence, But No Mention Of New Funds
- ExxonMobil Racks Up Discoveries in Guyana Block Eyed by Chevron
- Oil Market Sentiment Has Improved Significantly
- EU, US Eye Collaboration on Nuclear Materials
- EU Electricity Export to Ukraine Up 94 Percent in Two Years
- China Coal Output Falls for First Time since Government Ordered More
- USA Driving Activity to Increase to All-Time Highs
- BP Pulse Buys One of Europe's Largest Truck Stops
- UK CCUS Plans Outdated: Think Tank
- TC Energy to Sell Prince Rupert Gas Pipeline Project to First Nation
- I Squared Eyes Full Ownership of Europe Gas Storage Firm
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- EIA Drops 2024 Henry Hub Gas Price Forecast
- EIA and Standard Chartered Offer Up Latest Oil Price Predictions
- Red Sea Region Sees Another Watershed Incident
- Chevron Oil Project in Kazakhstan to Cost $48.5B
- OPEC Voices Encouragement after IEA Affirms Support for Oil Security
- Biden Govt Bares Strategy for Freight Charging, Hydrogen Fueling Infra
- Ukraine Hits Third Russian Refinery In Escalating Drone Strikes
- Rystad Looks at the Buzz Around White Hydrogen
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Is Peak Oil Demand Close?
- Vessel Sinks in Red Sea After Missile Strike
- JP Morgan, Standard Chartered Reveal Latest Oil Price Forecasts
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Rystad Forecasts Net Production of Top Permian Producers in 2024
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension