Oil prices slide as Iran refuses to freeze output levels

by WorldTribune Staff, September 27, 2016

The political rivalry between Iran and Saudi Arabia spilled into OPEC’s informal meeting in Algeria as Iran said it would not freeze oil output and Saudi said the meeting was merely “consultative”.

Iranian oil facility in the Persian Gulf. /AFP
Iranian oil facility in the Persian Gulf. /AFP

Saudi has said it would support a production freeze only if all OPEC producers are committed to the plan and if Iran caps its future production at its current daily output of 3.6 million barrels, according to people familiar with the kingdom’s proposal. However, Iran has said it plans to keep pumping until output hits the pre-sanctions level of 4.2 million barrels a day.

Oil futures dropped sharply on Sept. 27 after the two countries played down expectations for a deal to freeze or cut oil production.

November West Texas Intermediate crude fell by $1.27, or 2.8%, to $44.66 a barrel on the New York Mercantile Exchange. November Brent crude traded on London’s ICE Futures Europe fell $1.30, or 2.8%, to $46.05 a barrel.

“Any hopes for a crude output freeze being agreed [to] in Algiers this week have been dashed today after Saudi Arabia joined Iran in saying any talks on curbing output will be consultative,” said Neil Wilson, markets analyst at ETX Capital.

Iranian officials on Sept. 26 had reiterated their vow to increase production.

Saudi Arabia Energy Minister Khalid al-Falih later stressed the Algeria meeting’s purpose is “consultative” only.

“There is really no hope of any agreement when Iran and Saudi Arabia don’t agree,” said Alan Oster, chief economist at National Australia Bank.

Meanwhile, Goldman Sachs on Sept. 27 slashed its oil forecast for the rest of 2016, warning that supplies will continue to outstrip demand regardless of what happens in Algiers this week.

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