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Wednesday, February 17, 2016
The crude market could see a turnaround in the near future as several oil ministers have come together with a plan to freeze production. After a meeting between the oil ministers of Qatar, Russia, Saudi Arabia, and Venezuela the Saudi oil minister, Ali al Naimi said the freezing of the oil producers output would be enough to improve the oil market.
Speaking at a news conference, Naimi said freezing output at January levels would be adequate, providing that other major producers followed suit.
“Freezing now at the January level is adequate for the market, we believe,” he said. “We recognize today the supply is going down because of current prices. We also recognize that demand is on the rise.”
Naimi said the situation would be assessed over the next few months to determine if this step is enough to stabilize and improve the market. “This is very important, we don’t want significant gyrations in prices, we want to meet demand. We want a stable oil price,” he added.
Kuwait came out in support of the freeze, with its Minister of Oil, Anas al-Salah saying his country welcomed the deal and confirmed his country’s commitment to it.
The ‘freeze’ may prove to be adequate as the markets did not respond as expected upon the news, falling after investors expressed doubts that this agreement between the four could ease the glutted market and the fact that it is unlikely that other producers outside OPEC members and Russia would participate in the freeze. Azerbaijan has already indicated that it will not pull back on the taps, although it is unlikely that whatever production increase the country sees will have any effect on the market.
There is also the Iran question to figure into the equation as the country looks to ramp up production now that sanctions have been lifted. It recently loaded its first tanker bound for Europe since sanctions ended.
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