Saudi Arabia is prepared to sign up to an oil output freeze next month even without Iran taking part, a senior Opec delegate said, potentially removing one of the major obstacles to a deal among big producers.
Some of the world’s biggest oil exporters will meet in Doha on April 17 to discuss restraining output. It follows a provisional agreement reached in February by Saudi Arabia, Russia, Qatar and Venezuela to freeze production at January levels.
“There is agreement from many countries to go along with a freeze, why make it contingent on Iran,” said the delegate.
The comments contrast with those from Gulf officials last month, which suggested any deal was conditional on Iran, Saudi Arabia’s Opec rival, taking part alongside other big producer countries.
Iran sought to increase production and exports after the lifting of sanctions against its oil industry in January. Iranian officials have until now shown no willingness to back any deal that would result in restricting its own output.
Questions have been raised among Gulf delegates about the country’s ability to ramp up output, suggesting this could be one reason for compliance even without Iran.
“Despite all the bragging, we have yet to see what Iran can do,” said the delegate.
Abdalla El-Badri, Opec’s secretary-general, said on Monday at a news conference in Vienna: “Maybe in the future they will join the group. They [Iran] have some conditions about their production.”
About 15 Opec and non-Opec countries — accounting for two-thirds of global oil output — have so far supported an oil freeze, Qatar’s energy minister Mohammed Bin Saleh Al-Sada said last week.
A provisional deal has helped to support prices and reverse negative market sentiment toward oil. Brent crude was at $41.47 on Wednesday, up 53 per cent since hitting a 2016 intraday low of $27.10 a barrel.
“Look at what it [the move towards the oil freeze] did to change the psyche of the market,” said the delegate. “Now the market can see people are gathering, people are communicating. This collaborative element has helped the price.”
Hedge funds and other speculators have dramatically increased their bets on a higher oil price in the past several weeks. Their combined net long positions in Nymex and ICE WTI are now at 172m barrels, from just 35m barrels on January 12.
The delegate said he predicted higher oil prices by the end of the year, as excess supplies fell.
A sense of urgency among all producers to improve the economic situation has been a catalyst to better engagement between producers, he added.
Russia, he said, was now “taking a leading role” in engaging with other Opec producers. The country’s relationship with Saudi Arabia had improved, he added.
Although a production freeze at January levels was most likely, the delegate said, he left the door open for more discussion on which marker is used. “We’ll see who did what in January, February and March. Then maybe we can find numbers that add more credence in the market place,” he added.