The potential forthcoming agreement between Russia and a few OPEC producers to cap oil output is possibly “meaningless” due to Saudi Arabia being the lone nation with the potential to amplify production, according to a senior executive from the International Energy Agency’s comments made on Wednesday. Brent crude oil futures have climbed over 50% following bottoming out to a 12-year low point earlier this year, following OPEC member’s Saudia Arabia, Venezuela, Qatar, and non-OPEC member Russia reaching a deal in February to maintain production levels as they were in the month of January.
Qatar has extended an invitation to every nation within the Organization of the Petroleum Exporting Countries, and to every main oil producing nation that is not a member of OPEC to its capital city of Doha on April 17th to further their discussion regarding increasing the scope of the output cap agreement. Neil Atkinson, head of the International Energy Agency’s oil industry and markets division, spoke recently at an industry event regarding the potential effect the April meeting will have on the price of oil, “Amongst the group of countries (participating in the meeting) that we’re aware of, only Saudi Arabia has any ability to increase its production. So a freeze on production is perhaps rather meaningless. It’s more some kind of gesture which perhaps is aimed … to build confidence that there will be stability in oil prices.”
The nations of Libya and Iran have joined in avoiding the discussions, and their lack of presence, being that they both extreme potential to increase production, would constrain the effectiveness of the production cap agreement being widened at the April assembly. Iran’s increase in production in quarter one after their international sanctions were lifted has aligned with the IEA’s projections of 300,000 barrels per day, as Tehran’s production could climb once again at the same rate by quarter three. Atkinson furthered his comments, speaking on Iran’s recent increase in production, “Iran has not exactly been flooding the market with lots more oil. It seems to be far more measured.”
According to the IEA, the increasingly large disparity between demand and supply for oil will diminish later in the year, which will lead to a possible rebound in oil prices next year. Neil Atkinson continued with his comments, speaking on the optimistic future for the price of oil, “We think the worst is over for prices … Today’s prices may not be sustainable at exactly $40 a barrel, but in this mid-$30s and upward range, we think there will be some support unless there’s a major change in fundamentals.”