Tag Archives: Iran

Iran’s oil minister has raised the oil price without actually doing anything

Iran’s oil minister Bijan Zanganeh is a consummate politician.

Today he has single-handedly managed to boost the oil price and send Twitter crazy by implying that he will cooperate with other producers in freezing production, without actually saying…anything.

As it stands, the Saudi-led output freeze pledge is pretty lacklustre anyway. Confirming that you won’t lower production from near all-time highs will do very little to address the huge supply glut and slowed demand.

But without Iran’s cooperation, the deal goes from pretty lacklustre to downright useless. Iran, recently freed from international sanctions, was one of the world’s largest oil producers before the embargoes and if it decides to ramp up production then it will render a Saudi/Russian/Qatari/Venezuelan output freeze largely ineffective.

Zanganeh hasn’t explicitly said whether he would freeze production or not, instead sticking to newspeak mumblings of “support” and a “good meeting”, but this in itself speaks volumes.

The fact that the oil price has now lifted above $34 a barrel on this “news” shows exactly why the market should be taken with a pinch of salt.

To read the full story, go to: http://www.hotcommodity.co.uk/2016/02/17/brent-crude-iran-oil-output-freeze/

Price of brent crude rises after Iran’s oil minister says he supports production freeze

The price of oil has risen after Iran’s oil minister Bijan Zanganeh has said that he supports other producers’ pledges to freeze production – although he didn’t confirm if Iran would follow suit.

Zanganeh said that today’s meeting with his counterparts from Venezuela, Iraq and Qatar was good and that he supports cooperation between Opec and non-Opec producers, according to reports.

He told the oil ministry news service Shana that he supports anything to stabilise the market and that this is the first step, but more steps need to be taken, reported Reuters.

The talks followed yesterday’s meeting in Doha, where Saudi Arabia, Russia, Qatar and Venezuela all pledged to freeze oil output, if other producers participated.

Getting Iran to agree is the tricky part and Zanganeh, while positive about the talks, did not explicitly say whether he would agree to freeze output. Iran only recently had its Western sanctions lifted so is obviously keen to ramp up output and make up for lost time.

The price of a barrel of brent crude was up more than three per cent this afternoon to around $33.

“Asking Iran to freeze its oil production level is illogical … when Iran was under sanctions, some countries raised their output and they caused the drop in oil prices.” Iran’s OPEC envoy, Mehdi Asali, was quoted as saying by the Shargh daily newspaper before the meeting, according to Reuters.

“How can they expect Iran to cooperate now and pay the price?” he said. “We have repeatedly said that Iran will increase its crude output until reaching the pre-sanctions production level.”

Oil prices have been painfully low for the past 18 months, mainly due to Saudi Arabia’s “lower for longer” strategy to try and drive out higher-cost competition.

But the Opec leader’s plan has not been working, which is why it is now trying other ways to boost prices.

The market so far is unconvinced. With the countries pledging to freeze production at near-record levels and Iran not yet on board, it is simply not enough to end the mammoth supply glut.

For more analysis, check out the piece I wrote yesterday for London newspaper City AM:
Saudi-Russian pledge to freeze oil production may be smoke and mirrors

ANALYSIS ON TODAY’S NEWS TO FOLLOW SHORTLY

Latest oil price slump shows that black gold has lost its lustre for good

Oil tumbled more than two per cent yesterday, edging perilously close to an 11-year low despite growing fears of World War Three kicking off between Saudi Arabia and Iran.

You’d think that the risk of disrupting supply from two of the world’s largest producers would rattle traders, but no! Late last night you could buy a barrel of brent crude for a little over $36 (£25) – small change compared to the $115 highs of Summer 2014. Prices had trickled down to an 11-year low of $35.98 just before Christmas.

I’ve been bear-ish on oil for quite some time now despite some spikes throughout the year and I still think it could drop to $20 a barrel. But increasingly the market consensus appears to be that oil will rise in the medium term.

The typical view from people I speak to is that Opec (for which read Saudi) will keep production high, which will keep prices low by creating a supply glut. This in turn will cause other producers (for which read the US) to cut their output as they can’t make a profit and eventually this will push prices up as there will be less oil around to meet the demand.

I think this is a far too simplistic a theory.

Firstly, I think the decrease in production, namely from the US, would have to be incredibly dramatic and it would take quite some time to show up due to their mammoth stockpiles of oil. This would be a long term not a medium term effect – and would only work this way if there are no other mitigating factors. I wonder if the hand of government would come into play if the mighty US lost its booming shale industry that was turning it from a net importer to a net exporter of energy?

Secondly, this theory only works if demand stays the same. And here lies the unknown. With growth in China – the world’s largest consumer of commodities – having slipped back into second gear, will there be enough demand to keep oil prices high? The market volatility in China this week shows that no-one really has the faintest idea about what’s going to happen.

Meanwhile in the West, increased energy efficiency measures and investment in renewable power sources mean that oil isn’t the master of the energy market that it once was. There are even predictions that the West’s energy consumption will decrease by the 2030s.

Why does everyone assume that oil prices must, and will, stabilise at a higher price? Surely a lower price could eventually become the new normal and economies would have to adapt or die as a result?

Are you an oil bull or a bear? Email info@hotcommodity.co.uk with your views.

Happy New Year to you all!