Iran says it will support a production freeze proposed by Saudi Arabia and Russia, but it doesn’t mention its own output.
Crude oil rose Wednesday after Iran said it supported a proposal by Saudi Arabia and Russia that would freeze production at near-record levels, without saying whether it would curb its own output.
Futures surged 5.6 percent in New York. Iran’s oil minister, Bijan Namdar Zanganeh, met with counterparts from Iraq, Qatar and Venezuela after the output agreement Tuesday in Doha. Iran supports the proposal, Zanganeh said, according to the Shana news agency. He didn’t mention if the nation would deviate from plans to restore exports after the lifting of sanctions last month.
“The fact that they had a meeting and it ended cordially is reason enough for a gain,” said John Kilduff, a partner at Again Capital, a New York-based hedge fund that focuses on energy. “These countries are supposed to be at each other’s throats, so it’s something.”
Oil has dropped 23 per- cent since the Organization of the Petroleum Exporting Countries effectively abandoned output targets at a Dec. 4 meeting.
Iran, the second-biggest OPEC producer before sanctions were intensified in 2012, is seeking to boost output by 1 million barrels a day and regain market share. The nation has loaded its first cargo to Europe.
West Texas Intermediate oil for March delivery rose $1.62 to settle at $30.66 a barrel on the New York Mercantile Exchange. That is the highest close since Feb. 5. Prices sank to a 12year low this month, extending a 30 percent drop last year.
Brent for April settlement rose $2.32, or 7.2 percent, to $34.50 a barrel on the London-based ICE Futures Europe exchange.
The oil price gains helped Wall Street Wednesday as stocks of major energy companies rose. Wall Street’s gains capped a three-day rally, the longest so far in 2016, that has wiped out about half of the market’s losses since the beginning of the year.
The rise in oil prices Wednesday probably won’t preclude a drop to as low as $15 a barrel, said John Brynjolfsson, founder of money manager Armored Wolf.
“I see today’s rise as a big head fake,” Brynjolfsson said. “We still see a lot of blood in the streets, and there’s going to be more of it.”
Iran won’t “forgo its share of the market,” Zanganeh said this week, according to Shana. The nation pumped 2.86 million barrels a day in January, making it the fifth-biggest producer in OPEC, according to data compiled by Bloomberg.
“The Iranians sacrificed a great deal to get the sanctions lifted and are very much focused on bringing production online,” said Chris Lafakis, a West Chester, Pa.-based senior economist at Moody’s Analytics. “They have said that they aim to increase output by 1 million barrels a day, but that’s easier said than done.”
Even if producers reach agreement, the deal would have little impact on production and would “leave the global surplus in place” in the first half of 2016, Goldman Sachs Group analysts Damien Courvalin and Jeff Currie said in a report. Iran’s determination to expand output suggests its participation is unlikely, they said.
Venezuela, which along with Qatar also agreed to join the freeze, has lobbied exporters including Russia, Iran and Saudi Arabia to cooperate to balance supply and demand, and to revive prices. The Doha accord is conditional on other nations agreeing to participate, Russia’s Energy Ministry said in a statement.
Saudi Arabia pumped 10.2 million barrels aday of crude in January, according to data compiled by Bloomberg. Russian output of crude and a light oil called condensate rose to 10.9 million barrels a day last month, a post-Soviet high, according to a unit of the country’s Energy Ministry.