Ainhoa Murga
Saudi Arabia, Russia, Qatar and Venezuela agreed yesterday to freeze its oil production to the level of January in an attempt to stabilize prices. Together, these four powers account for about 30% of world production. The move is the result of over a year of secret talks between diplomats sector to forge an agreement between OPEC and producers outside the cartel in an attempt to boost prices by cutting production, something that Saudi Saudi takes over a year to oppose.
This preliminary agreement, which for the moment does not include Iran, is the first significant collaboration in fifteen years between OPEC and non-member producers (Russia) and opens the door to the adoption of further measures, as anticipated the Saudi authorities. Responsible for communicating the news were the oil ministers of the four countries met yesterday in Doha.
However, the Brent oil, which had managed to advance to 6% in London driven by speculation negotiations fizzled during the day as investors analyzed the agreement and some experts detracted from the real effect that can occur on a saturated market. The European benchmark closed down 4.6% to US $ 30.65 a barrel. In the US, a barrel of West Texas closed at US $ 29.10, down 0.9% on Monday.
Stock Exchanges in Europe also resented by the news marking a slight decline that put end to two consecutive days of rally. The German stock market fell 0.78%, followed by the Spanish (0.51%) and Italy (0.49%), while London managed to stay in positive territory, with an advance of 0.65%, despite the setback oil.
But as Saudi Oil Minister Ali al-Naimi, the agreement is only “the beginning of a process” that will require “additional steps to stabilize and improve the market.”
Round of negotiations
the success of the agreement will depend mostly on the accession of other producing countries, which can create friction especially with Iran. Iran plans to increase its production to regain lost market share during the years that are outstanding international economic sanctions linked to its nuclear program. Iranian Oil Minister Bijan Zanganeh said he will not bow their participation in the global oil market, according to news agency Shana.
“What is important is that first, the market is facing a surplus, and second, that Iran will not yield its share, “Zanganeh said.
for the Saudi authority Ali Al-Naimi, freeze production at January levels, level close to record highs is a right decision and hopes that other producers to adopt the plan. “We do not want significant swings in price, we do not want a reduction of supply, we meet the demand, we want a stable oil price. We will take one step at a time, “he said.
Saudi Arabia has resisted making any cuts in production, it would lose market share, at less than its rivals agree to also cut production.
Qatar will monitor compliance with the agreement, Energy Minister Mohammad bin Saleh al-Sada said. Low oil prices have had a positive impact on the world, he said and hoped that the other large producers, members of OPEC or not, join the covenant, which will start “immediately” a round of contacts and negotiations with countries like Iran and Iraq.
the oil minister of Venezuela, Eulogio del Pino, also attend these meetings to discuss the Middle East oil powers freezing pumping crude. The authority stressed the importance for his country that the market stabilizes and they paid a “fair price” for oil to maintain the level of investment required to sustain production.
The four powers They recognize that this phase of negotiations can take months and success is not assured. For now, other OPEC producers have already spoken in both directions. While Kuwait is willing to freeze production at three million barrels a day, the Minister of Energy vice Azerbaijan said his country “is not a major oil producer,” so that “cut or freeze production will not change nothing. “
Little impact
like the market, analysts greeted with warmth the news. The first analyzes stressed that the agreement to have any impact, Saudi Arabia should cut production, “not only offset the increased supply that adds the return of Iran” to the market, said Capital Economics in a note.
“The announcement was made countries whose production has barely grown recently,” said Eugen Weinberg, head of commodities research at Commerzbank. “If Iran and Iraq are not part of the agreement will not be worth much, and even then, it’s a compliance issue.”
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