A coalition of oil producing nations are seeking a consensus on freezing oil production at its current level to stabilize oil prices around the world. The Saudi, Russian, Qatari and Venezuelan oil ministers reportedly came to the agreement after a previously undisclosed meeting in Doha. The freeze on production would be the beginning of a process to stabilize and improve the market.
Top oil exporters Russia and Saudi Arabia have both agreed to the freeze on oil output at January levels. Production in January was at levels that were near record highs. Saudi Oil Minister Ali al-Naimi said, “We don’t want significant gyrations in prices, we don’t want reduction in supply, we want to meet demand, we want a stable oil price. We have to take a step at a time.” If the deal holds up, it could become the first joint OPEC and non-OPEC deal in 15 years. However, both countries acknowledge that the deal is contingent on other producers joining in.
Iran was absent from the talks, which could throw a money wrench into the whole deal. Iran is producing at least 1 million barrels per day below its capacity and pre-sanctions levels. According to a statement from Venezuelan Oil Minister Eulogio Del Pino, additional talks with Iran and Iraq would take place in Tehran on Wednesday.
Iran has previously stated that it was determined to raise production, as it looks to regain market share lost after years of international sanctions. Those sanctions were lifted in January following a deal over its nuclear program. Iranian Oil Minister Bijan Zanganeh previously said that the country would not give up its appropriate share of the global oil market. To sweeten the deal, Iran may be offered special terms, since its situation is different than those countries that have been producing at high levels for the past few years.
The Doha meeting came after more than 18 months of declining oil prices. After rising as high as $115 a barrel in mid-2014, crude prices have fallen below $30 a barrel for the first time in over a decade. Booming global production has led to oil stockpiles rising to record levels. Oil prices jumped to $35.55 per barrel after the news about the secret meeting was revealed. However, concerns that Iran may reject the deal later caused the price to drop below $34.
History would also suggest that compliance may be an issue. OPEC has been arguing over oil output levels for decades. Russia agreed to cooperate with OPEC on oil output levels in 2001, but instead of following through on its pledge, it raised its exports instead. The rivalry in the Middle East between Sunni Saudi Arabia and Shi’ite Iran could also complicate any potential agreement.