In the aftermath of Bloomberg's surprising Friday report, according to which Saudi Arabia flipflopped on its previous promise that it would freeze its oil output while allowing Iran to grow supply until it hit its pre-embargo peak, instead saying that it would only join the freeze curbe Iran - and all other OPEC member nations - also joined, crude tanked.
Today, what little hope there may have been that Iran will suddenly change its mind and join the production freeze evaporated on Sunday when Iran's oil minister rejected a Saudi demand to stop throttling up its petroleum production. As the WSJ adds, this threatens what has become a farcical deal to "limit crude output and raise prices" when the major oil producers meet in Doha on April 17.
The follows Zanganeh's admission that Iran's oil and condensates exports surpassed 2mm b/d, a trend Iran will certainly not want to imperil.
Iranian Oil Minister Bijan Zanganeh
As the WSJ notes, Zanganeh's remarks were his first comments since a report emerged last week that Saudi Arabia, the world's largest crude exporter, would limit its production only if Iran followed suit.
The dueling positions by the Middle East's two biggest rivals for power and economic might have set off a scramble among other oil-producing nations to salvage a deal to freeze their output and stop growth in the world's petroleum supplies. Global oil production outpaces demand by almost two million barrels on any given day, sending prices to their lowest levels in over a decade.
Ironically, in advance of the Doha meeting which many thought had a chance of reaching some agreement, other OPEC members had pushed their oil production to the limit, flooding the market with even more excess supply. Most will find it virtually impossible to throttle production back.
As a reminder, Saudi Arabia and other members of the 13-nation Organization of the Petroleum Exporting Countries are set to meet with nonmembers like Russia on April 17 in Doha to hash out a production freeze.
The Bloomberg report on Friday. citing an interview with the kingdom's Deputy Crown Prince Mohammed bin Salman, shocked Saudi Arabia's Arab allies in the Persian Gulf.
Before the prince's comments, Saudi Arabia had been signaling it would hold production steady, instead of increasing, even if Iran ramped up its output. Iran just received relief from Western sanctions that had crippled its oil industry and is increasing output to achieve presanctions levels.
As for Iran, it is merely sticking to what it has said before it would do: Zanganeh told Iran's semiofficial Mehr News Agency that he still intended to bring Iran's oil production to its presanctions level of four million barrels a day an increase of one million barrels a day compared with late 2015.
As noted above, Iran's oil and gas condensate exports rose by 250,000 barrels a day in March to surpass two million barrels per day, the ministry's Shana news service quoted Mr. Zanganeh as saying.
Even though Mr. Zanganeh told Mehr he would certainly attend the Doha meeting if "he had time," his refusal to heed to Saudi demands that Iran freeze its output calls the success of the upcoming meeting into question.
With the Iran breaking ranks, Kuwait and Qatar are scrambling to reach Riyadh to salvage the prospective agreement, according to the WSJ. Kuwait's acting oil minister Anas al-Saleh said cooperation between OPEC and nonmembers would "certainly help stabilize oil prices."
"We believe that a common agreement on a positive stand will serve market stability," the minister said.
Of course, Kuwait has already made it clear that without Iran there is no deal: as we reported on March 8, Kuwait's oil minister said on Tuesday that his country's participation in an output freeze would require all major oil producers. "I'll go full power if there's no agreement. Every barrel I produce I'll sell," Anas al-Saleh told reporters in Kuwait City last month.
He may now have no choice.
Oil prices have risen since Saudi Arabia and Russia met in Doha in February and first broached the idea of a freeze. Prices have climbed over $40 a barrel in recent weeks, after hitting lows of $27 a barrel in January. But prices fell on Friday after the Saudi prince's comments were published. It remains to be seen if oil will revert back to its February lows now that any hope for a coordinated supply cut is no longer on the table.