Saudi Arabia Iran rivalry prevents an oil output Freeze?


The tensions between Saudi Arabia and Iran can appear as an obstacle to the oil output Freeze deal on Wednesday at OPEC meeting in Algeria. What are the odds for the deal happening?

28 September, AtoZForex – Rivalry trend between Saudi Arabia and Iran is a possible obstacle for the Organization of the Petroleum producing countries (OPEC) oil output freeze deal on Wednesday in Algeria, according to the analysts.

Saudi Arabia Iran rivalry prevents an oil output Freeze?

The OPEC meeting comes at a downturn tendency for the oil prices, as excess supply from the traditional producers as well as competition from US shale producers are adding to the turmoil. The part of the OPEC bloc was hoping for the oil output cut deal, yet the tensions between Middle Eastern rivals can appear as a barrier for the successful agreement today. BMI Research’s oil and gas analyst, Emma Richards, has commented:

“The relations between Saudi Arabia and Iran are just so, so poor I can’t see any scenario under which Saudi Arabia would cut without Iran freezing and Iran has said so consistently that they just will not freeze until they reach pre-sanctions levels.”

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Saudi Arabia indicated that it would support a potential deal in case if players will stay committed to the agreement and Iran caps its future production at 3.6 million barrels, as people familiar with the matter say. However, Iran’s intention is to increase its production to the pre-sanctions levels.

Is there a possibility for the oil output freeze?

The rivalry between Iran and Saudi Arabia has its implications for the oil market, as oil prices were flat on Wednesday in Asia in the wake of fall in the last session on Saudi Arabia comments regarding the deal. The benchmark US crude oil futures contract traded nearly $44.65 per barrel while the European Brent was trading at around $6 a barrel midday in Asia.

In the wake of the mixed signs by a number of countries, Khalid al-Falih, the Saudi energy minister finally doused all the anticipations of an agreement on Tuesday when he stated that differences in opinions among OPEC members were slightly fading away, yet he did not expect a deal from the Algeria meeting. Simon Macadam, the Capital Economics economist, has commented:

“We are always a little skeptical of announcements like these. There has been a consistent pattern over the last few months of OPEC ministers attempting to ‘talk up’ prices with comments about a potential output freeze deal being close. But historically most of these comments have proved to be unfounded.”

However, there is also a possibility for the oil output freeze deal, which could ultimately drive the oil prices up.

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