The price of Oil declined nearly 3 percent on Monday due in part to a major announcement from Iran. Officials from Iran announced explicitly that the OPEC member would not join in on any collaborative effort to reduce or halt oil production to stabilize the market. This declaration has undermined oil’s recent slight rebound, as the market is once again concerned regarding the excessive supply that led to the price falling sharply in the recent past.
An internationally renowned benchmark for oil futures dipped below $40 a barrel at the closing bell on last Friday. Tamas Varga, an oil analyst at London brokerage PVM Oil Associated, spoke recently on the movement of oil, “Oil is down because Iran said they would only join the output freeze group once they reached production of 4 million barrels a day (bpd).” Varga was making reference to statements made by Iranian oil minister Bijan Zaganeh on Sunday. Zaganeh declared that the nation of Iran would not even join in on discussions regarding the decision until they reached the 4 million barrels a day level of production.
According to Zaganeh, Iranian oil production is on pace to climb to 2 million barrels per day by as soon as March 19th, while their output was reported at 1.75 million barrels per day as of February 19th. Minister Zaganeh is set to meet with the Russian oil minister, Alexander Novak, in Tehran on Monday.
Recent data suggests that Saudi Arabia followed through on their agreement with other oil producing nations to freeze their oil export levels. Saudi Arabia’s output of crude oil remained stable at roughly 10.22 million barrels per day in the month of February.
Both OPEC and non-OPEC members are set to assemble for their next convention in mid-April, as they will be furthering their discussions regarding a halt in oil production. There was potential for a meeting in Russia on March 20th, yet it now seems as if that will not be happening.
Investment Bank Morgan Stanley released a statement regarding their reactions to and vision for oil price movements, “Oil prices now seem to have bottomed, even though they are likely to stay subdued for the rest of this year before starting to move higher in 2017…When oil prices are falling below production costs, the income gains for consumers will be smaller than the costs to producers, and falling oil prices become a negative-sum game.”