We’ve been hearing plenty of talk about a potential agreement amongst the world’s biggest petrostates to “freeze” production at current levels for more than six weeks now, and during that time the plan has vacillated between doomed-from-the-start and possible-but-unlikely-to-accomplish much.
From the beginning Iran has been one of the biggest obstacles for those states willing to limit their output—now that it’s sanctions-free, Tehran hopes to boost production by as much as one million barrels per day by the end of the year. But recently some OPEC officials said Saudi Arabia might be willing to enter into a freeze deal even without Iranian cooperation, in the hopes of bringing Iran onboard later down the road. Now, the Saudi Arabian deputy crown prince is pouring cold water on that notion, saying the deal is off if Iran won’t play ball. Bloomberg reports:
Saudi Arabia will only freeze its oil output if Iran and other major producers do so, the kingdom’s deputy crown prince said, challenging the country’s main regional rival to take an active role in stabilizing the over-supplied global crude market. […]
“If all countries agree to freeze production, we’re ready,” bin Salman said in an interview with Bloomberg. “If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.”
Markets are predictably reacting poorly to this announcement, with both WTI and Brent crude down more than 3 percent on the day. And if that wasn’t enough to rattle traders already cagey about the oversupplied market, Libya is preparing to reopen three of its oil ports. The WSJ reports:
Three Libyan oil ports that have been closed for over a year are set to reopen, now that a unity government has arrived in Tripoli, militia leaders said, a rare positive sign for an oil sector that has been under siege. […]
The reopening of the ports raises hope that Libya can increase its oil exports, the main source of revenue for a North African country that in theory could pump up to 1.5 million barrels a day. In recent months it has produced about 400,000 barrels a day, as constant attacks on its facilities took a toll.
Petrostates are due to meet in Doha on April 17th to come up with an agreement to keep output as is, but they’re going to struggle to find consensus as countries from Iran to Iraq to Libya all try to fight for more market share. If they do manage to pull off a freeze deal, that won’t do much to eat away at the global glut of crude. But if they don’t—and that’s looking like an increasingly likely possibility—we’ll have had much ado about absolutely nothing for two solid months.