Azernews.Az

Friday March 29 2024

Deal on freezing oil output to have psychological effect on crude prices, expert says

23 February 2016 15:24 (UTC+04:00)
Deal on freezing oil output to have psychological effect on crude prices, expert says

By Aynur Karimova

The psychological effect of Russia and Saudi Arabia's decision to freeze oil production at January 2016 level will be greater than the economic effect, Robert M. Cutler believes.

The senior research fellow at the Institute of European, Russian and Eurasian Studies of the Carleton University, told Azernews that prices may rise somewhat in the short term, "under the belief that this agreement actually represents a stabilization of production levels."

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

Such a decision was aimed at dealing with decreasing oil prices and relieving the glut on the world oil market. Kuwait and UAE also joined this deal.

Touching upon the joining of new countries to this deal, Cutler said it is more likely that the deal will fall apart, either wholly or in part, than that new countries will join the deal and uphold it.

"Verbal declarations are easier than renouncing one's own interest through implementation of the commitment," he believes.

Following the Doha deal, all eyes were on Iran, which has repeatedly voiced intention to return to the oil market and regain its previous position as a huge oil supplier.

In January 2016, Iran with its 158 billion barrels of proven oil reserves was freed of international sanctions. The Islamic Republic immediately voiced its intention to increase exports by 500,000 barrels per day. After it global oil prices pushed below $28 per barrel.

Oil prices rose by more than 5 percent reaching $34 a barrel on February 17 after Iran said it supports freezing oil production for boosting prices.

On February 17, Tehran hosted a meeting of oil ministers of Iran, Venezuela, Iraq and Qatar for over two hours, after which Iranian Oil Minister Bijan Namdar Zangeneh said the Islamic Republic welcomed the initiative to set a ceiling as a first step toward stabilizing the market.

"We welcome efforts by OPEC members and non-members to turn oil prices to a fair level, but of course, our national policy to go back to our pre-sanctions production level is intact," Hossein Jaber Ansari, the Iranian Foreign Ministry spokesman said during a press conference in Tehran on February 22.

Iran has increased oil exports by 400,000 barrels per day at the first month following the removal of international sanctions against it.

Iran’s crude export in February has reached 1.4 million barrels per day, while forecasts show that this figure will stand at 1.5-1.56 million barrels per day by March.

--

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

Follow us on Twitter @AzerNewsAz

Loading...
Latest See more