Tehran’s oil minister said it does not agree with holding any OPEC+ meeting, which has already been stalled, in the absence of a clear proposal and expected outcome from such talks for the oil market. The warning comes amid pressure from US President Donald Trump for the Organization of the Petroleum Exporting Countries led by Saudi Arabia and its allies, a group collectively known as OPEC+, to urgently stabilise global oil markets.
Oil prices hit an 18-year low on March 30 due to a slump in demand caused by lockdowns to contain the coronavirus outbreak and the failure of OPEC and other producers led by Russia to extend a deal on output curbs that expired on March 31.
But oil minister, Bijan Zanganeh, wrote a letter dated April 7 and addressed his “grave concerns” to the Algerian oil minister, who holds the presidency of OPEC.
He wrote: “The vague circumstances around which the upcoming OPEC and non-OPEC ministerial (meeting) is being organised is of grave concern to me,” the
He said: organising a meeting “in the absence of any clear and consensual outcome (to) convey to the market” would be a message of failure even before it starts, which “may aggravate the current low price environment even further”.
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Mr Zanganeh said a meeting “will not be fruitful without first understanding what is the perceived outcome from the meeting, how the meeting is expected to facilitate achieving this outcome, and what might be the likely oil market reaction to it”.
He said that issues like the size of a cut and duration, how much would countries like the US and Canada cut, what is the baseline for the cuts for each country and how would the reductions be distributed, should be discussed first before holding a meeting.
Iran, which is under US sanctions, has been exempted from any output reductions.
Saudi Arabia, Russia and allied oil producers are set to agree to deep cuts to their crude output at talks this week.
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But sources said this will only happen if the US and several others join in with curbs to help prop up prices that have been hammered by the coronavirus crisis.
It comes as Riyadh and Moscow attempt to overcome the rancour stemming from talks in March, when a deal to extend production cuts fell apart.
Since then, Saudi Arabia has been flooding the market with extra crude, and it has insisted it would no longer carry what it considered an unfair burden of output cuts when other producers are not complying with their cuts.
Global oil demand has dropped by as much as 30 percent, or about 30 million barrels per day (bpd), as measures to reduce the spread of the coronavirus have caused demand for jet fuel, gasoline and diesel to crash.
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OPEC+ is due to hold a video conference on Thursday at 2pm.
After the OPEC+ talks, Saudi Arabia will host a video conference on Friday for energy ministers from the Group of 20 (G20) major economies to alleviate the effects of the pandemic on energy markets.
Oil bounced back on today, with US crude jumping more than $ 1, lifted by hopes that Thursday’s OPEC+ meeting would trigger output cuts to shore up prices.
Brent crude LCOc1 was up by 75 cents, or 2.4 percent, at $ 32.62 per barrel by 2.46am.
The coronavirus crisis across the globe has triggered oil prices to slump
US West Texas Intermediate (WTI) crude CLc1 rose $ 1.30, or 5.5 percent, to $ 24.93 a barrel.
It comes after Mr Trump said Riyadh and Moscow had agreed to cut an unprecedented 10 million to 15 million barrels per day, or about 10 percent to 15 percent of global supply.
He has not committed to any action by US companies.
On Tuesday, The US Department of Energy said said American output was already falling without government action, in line with the insistence of the White House that it would not intervene in the private markets.
That decline, however, would take place slowly, over the course of the next two years.
While Saudi Arabia, Russia and other members of the OPEC+ group have expressed a willingness to return to the bargaining table, they have made their response conditional upon action by the US and other countries that are not members of OPEC.
No agreement has been formalised.