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Doha meeting to have short-term effect on oil prices, expert says

19 February 2016 18:00 (UTC+04:00)
Doha meeting to have short-term effect on oil prices, expert says

By Aynur Karimova

Decreasing oil prices push the oil producing countries to find out solution to this global problem together.

The recent agreement between some OPEC and non-OPEC countries to freeze the oil production was regarded as a joint response to save their low-oil-hit economies. Experts believe that a freeze in production from January's near-record levels would do little to relieve the glut.

Energy ministers of Russia, Saudi Arabia, Venezuela and Qatar agreed on February 16 to freeze the production of oil after the negotiations in Doha. Oil output will be stabilized at the level of January 11, if other major exporters follow the suit.

Omid Shokri Kalehsar, an energy analyst, told Azernews that such a meeting will have a short-term effect on oil prices.

"I don’t think such a meeting will have more effect on oil prices, because in Doha meeting four countries agreed on freezing oil production, but in a condition that other OPEC members and non-members has to freeze oil production. Some OPEC members are planning to increase oil production capacities and it would have a negative effect on oil prices," he said.

The expert believes that if all OPEC members and non-members such as Russia freeze oil production one can expect increase in oil prices in a mid-term.

"But it is reality that oil market has about 250,000-300,000 barrels per day oversupply," he noted. "Oil producing countries have to make a decision to decrease oversupply capacity and after such a decision we can be hopeful about oil prices' future."

After Russia and Saudi Arabia agreed to freeze oil production at the January 2016 level, Kuwait and the UAE also joined this deal. Commenting on the possibility of joining of new countries to this deal, Kalehsar said these countries have joined this deal but with a condition that other OPEC members and non-members will also make such a decision.

"Joining of other OPEC members to this deal is possible, but all members and non-members have to decrease oil production and export capacity," he added.

Being free of international sanctions, energy-rich Iran, the fourth country in the world for its proven oil reserves of 158 billion barrels is keen to return to the oil market and regain its previous position as a huge oil supplier.

However, in January 2016, after Iran voiced its intention to increase exports by 500,000 barrels per day, global oil prices pushed below $28 per barrel.

Meanwhile, oil prices rose by more than 5 percent to climb above $34 a barrel on February 17 after Iran voiced its support for freezing production to boost prices, Reuters reported.

Iranian Oil Minister Bijan Namdar Zangeneh, after a meeting with his counterparts from Venezuela, Iraq and Qatar in Tehran for over two hours, said the Islamic Republic welcomed the initiative to set a "ceiling" as a first step toward stabilizing the market.

The minister, however, did not explicitly say that Iran would keep its own output at January's levels.

Kalehsar believes that Iran‘s decision to return to the oil market after lifting of international sanctions and to recover its oil production capacity to the 2005 level - 4.5 million barrels per day - will lead to drop of oil prices.

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Aynur Karimova is AzerNews’ staff journalist, follow her on Twitter: @Aynur_Karimova

Follow us on Twitter @AzerNewsAz

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