Azernews.Az

By Aynur Karimova

While the majority of OPEC members (11 out of 13) plan to attend an April 17 meeting about freezing supply to support prices, Libya have rejected its participation joining another OPEC member Iran, which ignores the initiative.

Experts believe that the absence of the two OPEC members would limit the impact of any freeze by producers from OPEC, along with Russia.

Chris Cook believes that Iran and Libya's rejection of the oil freeze plan can only make a medium term collapse in price more certain.

The former director of International Petroleum Exchange told Trend that the more rapidly these two countries re-enter the market the quicker will be the price fall.

To deal with decreasing oil prices and relieving the glut on the world oil market, the energy ministers of Russia, Saudi Arabia, Venezuela and Qatar met in Doha on February 16 and agreed to freeze the oil output at the level of January 11.

Iran and Libya, which are keen to return to the oil market with huge steps, have already announced that they will not join the oil production freeze plan.

Libya's output has been limited for many months by unrest. Conflict in Libya has slowed output to around 400,000 barrels per day since 2014, while the country pumped 1.6 million bpd before the 2011 civil war. Now, Tripoli has made clear its wish to return to pre-conflict oil production rates.

Iran has also repeatedly voiced intention to return to the oil market and regain its previous position as a huge oil supplier. The Iranian officials have made clear that the Islamic Republic will not freeze output as it wants to raise exports following the lifting of Western sanctions in January 2016.

Iran produced about 2.9 million bpd in January and the government is talking about adding a further 500,000 bpd to exports.

Cook believes that the proposal by the two biggest oil producers to freeze production at the maximum levels at which they can pump oil is notable only in that the parties agreed on anything at all.

"In that sense it [the proposal] has therefore been supportive to rise oil price in the short term because it prepares the ground for coordination on production cuts as and when the pain gets too great as and when prices fall significantly in the medium term, which in my analysis will occur by summer,” he added.

Oil prices have greatly fluctuated since 2014, reaching their minimum at $40 per barrel on average recently against $112 per barrel fixed before.

Oil was sold at above $100 per barrel in June 2014, but a combination of oversupply of oil and weaker demand sent prices sharply lower in the second half of the year.

The oversupply was mainly due to the export of U.S. shale oil to the market, while demand fell because of a slowdown in economic growth in China and Europe.

Oil continued its descent in 2015 as well, by falling toward $30 a barrel after China, the world's second largest economy and second largest oil consumer, devalued its national currency, the yuan.

Meanwhile, forecasts about the world crude price are becoming even more pessimistic, showing that it will stay below $60 per barrel through 2016 as the oil market struggles to recover from a supply glut.

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

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