Scepticism as no cut agreed
Four major oil producers agree to freeze output
An agreement emerged after Saudi Oil Minister Ali Al-Naimi held talks in Qatar with Russian Energy Minster Alexander Novak. Qatar and Venezuela agreed to participate in the freeze at January levels.
Brent crude rose as much as 6.5% on the news, before falling back to just 2% higher at $34.20 a barrel as analysts noted that it was only a freeze and not a cut.
Julian Jessop, Capital Economics head of commodities research, said in a note, said: “At face value this is clearly positive for oil prices, although they had already risen by 5% in the last 24 hours in anticipation of some sort of deal.”
Alastair McCaig, market analyst at IG, said: “All they’ve agreed to is not increasing output, and that doesn’t include Iran.”
Investors remained sceptical as other producers showed few signs of joining the agreement. Azerbaijan has said it has no plans to freeze its oil production, and Iran is cranking up output.
Augustin Eden, research analyst at Accendo Markets, said: “People are hopeful when they hear this talk of output freezes, but it’s already now looking as if that’s not going to happen.”
Saudi Arabian Oil Minister, Ali al-Naimi said at a briefing in Doha. “Freezing now at the January level is adequate for the market.
“We don’t want significant gyrations in prices, we want to meet demand. We want a stable oil price.”
It was announced that Qatar will monitor the output freeze agreement which marks a huge shift in the position of Opec nations who said last year they would stick to existing levels.
However, oil is 70% below its 2014 peak price, caused largely by the over-supply, now supplemented by Iran following the lifting of sanctions.