By Rania El Gamal
DUBAI (Reuters) – Iran does not agree with holding any OPEC+ meeting in the absence of a clear proposal and expected outcome from such talks for the oil market, its oil minister said in a letter to OPEC and seen by Reuters.
“The vague circumstances around which the upcoming OPEC and non-OPEC ministerial (meeting) is being organised is of grave concern to me,” the minister, Bijan Zanganeh, wrote in the letter dated April 7 and addressed to the Algerian oil minister, who holds the presidency of OPEC.
Zanganeh said that 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”.
Saudi Arabia, Russia and allied oil producers, a group known as OPEC+, will agree to deep cuts to their crude output at talks this week only if the United States and several others join in with curbs to help prop up prices that have been hammered by the coronavirus crisis, OPEC+ sources said.
OPEC+ is due to hold a video conference on Thursday at 1400 GMT, after U.S. President Donald Trump said last week that Riyadh and Moscow had agreed to cut an unprecedented 10 million to 15 million barrels per day, or about 10% to 15% of global supply. He has not committed to any action by U.S. companies.
The U.S. Department of Energy said on Tuesday that U.S. 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.
Global oil demand has dropped by as much as 30%, 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.
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 United States and other countries that are not members of OPEC. No agreement has been formalised.
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 United States 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 U.S. sanctions, has been exempted from any output reductions.
Any final agreement for how much OPEC+ will cut during their talks on Thursday would depend on the volumes that other producers such as the United States, Canada and Brazil are willing to reduce, an OPEC source said on Tuesday.
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, the group said in a statement on Tuesday.
Riyadh and Moscow are trying 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.
Oil bounced back on Wednesday, with jumping more than $1, lifted by hopes that Thursday’s OPEC+ meeting would trigger output cuts to shore up prices.
LCOc1 was up by 75 cents, or 2.4%, at $32.62 per barrel by 0246 GMT. U.S. West Texas Intermediate (WTI) crude CLc1 rose $1.30, or 5.5%, to $24.93 a barrel. [O/R]