Iran 'welcomes' but does not commit to oil output freeze

Iran's oil minister, Bijan Zanganeh, has welcomed the Saudi-Russian deal to keep a ceiling on oil output, but has not committed to limiting Iran's production.

He was quoted by the official news agency Shana, following a meeting in Tehran.

Venezuela and Qatar, which are part of the agreement, met to broker a deal with both Iran and Iraq.

Earlier, Iraq's oil ministry had said it was in favour of capping production.

Mr Zanganeh said: "We look forward to the beginning of co-operation between Opec and non-Opec countries and we support any measure that can stabilise the market and increase prices,"

But he did not give any explicit promises that Iran would keep its own output at January's levels.

All the visiting oil minsters left without comment following the meeting.

Iran has only just restarted oil exports after sanctions were lifted.

The agreement is designed to reflate oil prices, which have sunk by about 70% from their recent peak of $116 in June 2014 thanks to oversupply as the global economy slows down.

But the "freeze" in output at January levels simply allows oil producers to continue pumping at record levels.

After falling on Tuesday and early Wednesday, the price of a barrel of Brent crude rose by 5.7% to $34 a barrel. US crude was up 5% at $30.50.

FGE, international energy analysts, said: "Moves to freeze output at January levels will make little difference to the overall supply-demand balance this year and will not be enough to clear the 600,000 barrels per day surplus projected for the year."

Freeze 'illogical'

Before the meeting, Iran's Opec envoy reportedly said it was "illogical" for it to join the oil output freeze agreed on Tuesday.

Mehdi Asali, quoted in Iranian newspaper Shargh, said Iran would continue to increase oil production until it reached pre-sanction levels.

"Asking Iran to freeze its oil production level is illogical," he said. "When Iran was under sanctions, some countries raised their output and they caused the drop in oil prices.

"How can they expect Iran to co-operate now and pay the price?" He said.

Iran wants to increase oil production to levels seen before sanctions

Paul Stevens from the Royal Institute of International Affairs at Chatham House and an expert on the oil markets, said: "Before sanctions in 2012, Iran was producing around 4.4 million barrels a day.

"Just before sanctions were lifted in mid-January 2016, it was producing 2.8 million barrels per day.

"Officials have previously said they wish to increase it to four million barrels a day within the next three months. I think that is a wildly optimistic figure, but any increase still presents problems in terms of oversupply."

'Not credible'

Mr Stevens said the Saudi-Russian deal had "no credibility whatsoever" and was a strategic move by Saudi Arabia.

He pointed out that Russia - not a member of the Opec cartel - had reneged on previous production agreements.

Sebastien Marlier, commodities analyst at the Economist Intelligence Unit, said these talks marked the beginning of a "fraught, protracted negotiation process within Opec. Yet joint output cuts by both Opec members and Russia remain a distant prospect."

He, too, believed Saudi Arabia was playing a clever game: "It shows that they are willing to collaborate and are not stubbornly sticking to their painful strategy of flooding the market to evict higher-cost producers.

"It shifts the burden of responsibility for refusing to cut production to arch-rival Iran.

"Finally, it maintains the status quo while talks are ongoing, thereby continuing to press US shale and other struggling oil producers outside of Opec."

Tensions also remain between Saudi Arabia and Russia over Syria.

Russia is supporting President Bashar al-Assad's regime, with help from Iran, while Saudi Arabia is backing opposition forces.