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Iran says it is 'illogical' for it to join oil output freeze Iran says it is 'illogical' for it to join oil output freeze
(about 2 hours later)
Iran's Opec envoy is reported as saying it is "illogical" for it to join the oil output freeze agreed by a Russian and Saudi Arabian-led group on Tuesday.Iran's Opec envoy is reported as saying it is "illogical" for it to join the oil output freeze agreed by a Russian and Saudi Arabian-led group on Tuesday.
Mehdi Asali, quoted in the Iranian newspaper, Shargh, said Iran will continue to increase oil production until it reaches pre-sanction levels.Mehdi Asali, quoted in the Iranian newspaper, Shargh, said Iran will continue to increase oil production until it reaches pre-sanction levels.
Venezuela's oil minister is due to hold talks in Tehran to broker a deal with Iran and Iraq on Wednesday.Venezuela's oil minister is due to hold talks in Tehran to broker a deal with Iran and Iraq on Wednesday.
Iran has only just restarted oil exports after sanctions were lifted.Iran has only just restarted oil exports after sanctions were lifted.
The move by four countries, including Venezuela and Qatar, is the first of its kind in 15 years.The move by four countries, including Venezuela and Qatar, is the first of its kind in 15 years.
It is designed to reflate oil prices, which have sunk by about 70% from their recent peak of $116 in June 2014. It 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.
The plan though failed to convince oil traders. In Tuesday trading the price of a barrel of Brent crude fell by 3.2%. The plan though failed to convince oil traders.
In Tuesday trading the price of a barrel of Brent crude fell by 3.2% and a further 1.3% in early Wednesday trading. before recovering to stand up 1% at $31.52 a barrel.
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."
'Special terms''Special terms'
Iraq's oil ministry is in favour of capping production.Iraq's oil ministry is in favour of capping production.
It said it was ready to commit to a production freeze if a deal was reached among other producers.It said it was ready to commit to a production freeze if a deal was reached among other producers.
But Iran's Mr Asali said to Shargh: "Asking Iran to freeze its oil production level is illogical... when Iran was under sanctions, some countries raised their output and they caused the drop in oil prices.But Iran's Mr Asali said to Shargh: "Asking Iran to freeze its oil production level is illogical... 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?""How can they expect Iran to co-operate now and pay the price?"
It aims to raise its crude production and exports to one million barrels a day over the next six months. 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 4 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."
Two non-Iranian sources close to the Opec discussions told Reuters that Iran could be offered special terms as part of the output freeze deal.Two non-Iranian sources close to the Opec discussions told Reuters that Iran could be offered special terms as part of the output freeze deal.
'Not credible''Not credible'
There are doubts over the worth of the move.There are doubts over the worth of the move.
Paul Stevens, from the Royal Institute of International Affairs at Chatham House and an expert on the oil markets, said Tuesday's agreement had "no credibility whatsoever". Mr Stevens agreed an exception might be made for Iran, but he believed Monday's agreement had "no credibility whatsoever".
He pointed out that Russia - not a member of the Opec cartel - had reneged on previous production agreements.He pointed out that Russia - not a member of the Opec cartel - had reneged on previous production agreements.
It last agreed to co-operate with Opec back in 2001, but never followed through on its pledge and raised exports instead.It last agreed to co-operate with Opec back in 2001, but never followed through on its pledge and raised exports instead.
In the face of competition from US shale producers, Saudi Arabia and its Opec allies in the Gulf have followed a strategy of raising production to protect market share rather than prices. "I believe the Saudis are playing a game. They have agreed to this deal knowing others are unlikely to stick to it, but after a few months it allows them to take the moral high ground and continue with their strategy of protecting market share at the expense of price.
"I assume Russia agreed to it because they are struggling to keep up production at the present level, so why not make a virtue out of necessity?"
Tensions also remain between Saudi Arabia and Russia over Syria.Tensions also remain between Saudi Arabia and Russia over Syria.
Russia is supporting President Assad's regime, with help from Iran, while Saudi Arabia as the regional Sunni power is backing opposition forces. Russia is supporting President Assad's regime, with help from Iran, while Saudi Arabia as the is backing opposition forces.