Comments From Russia, Iraq and Iran Keep Oil Traders Confused

Oil prices were extremely volatile on Wednesday reacting to comments from Iran and Iraq and a surprise climb in official US oil inventories. WTI oil is trading at 46.86 while Brent oil is trading at 2.25% at 49.06. An Organization of the Petroleum Exporting Countries delegate told The Wall Street Journal that Tehran had sent a letter to OPEC members that it would attend the informal meeting next September in Algeria. If confirmed, it could signal a reversal in Iran’s stance, as it had declined to attend the last informal meeting back in April where a production freeze pact was discussed.

Oil prices had been positive after Reuters reported Iran is sending positive signals that it may support joint action to prop up the oil market, citing sources in OPEC and the oil industry.

OPEC’s third-largest producer has been boosting output after the lifting of Western sanctions in January. Tehran refused to join a previous attempt this year by OPEC plus non-members such as Russia to stabilize production, and talks collapsed in April.

Though Iran has not yet decided whether to join a new effort, Tehran appears to be more willing to reach an understanding with other oil producers, the sources said.

Russia, which was ready to freeze production at the last meeting, now wants to see an internal agreement among OPEC before it commits to rejoining an initiative.

“Negotiations are ongoing. I see positive signs coming from OPEC ‘majors’,” said a senior industry source familiar with the discussions, referring to Riyadh and Tehran.

The International Energy Forum, which groups producers and consumers, is due to meet on Sept. 26-28 in Algiers. Iran confirmed its participation in a meeting at the forum, an OPEC source said on Tuesday.

A two-year long selloff in oil has severely hurt the economies of Venezuela, Iraq and Nigeria. Those nations are seen as more anxious to boost crude prices than OPEC producers such as Saudi Arabia and Iran, which are more keen in protecting market share.

In light of the new energy supply configuration, analysts at Goldman Sachs predict that even if the Organization of Petroleum Exporting Countries (OPEC) agree on a production freeze next month, the move will be self-defeating as net energy importer nations begin buying energy supplies en masse to hedge against higher prices.

It seems as though the market is not affected in same the manner by the statements of Iraqi PM Haidar al-Abadi who announced that Iraq hadn’t reached its full share of the oil market.

This could indicate that Baghdad would rather not freeze its production of crude oil as part of any deal reached by OPEC to raise prices.

When asked during a press conference whether the Iraqi government would welcome such an agreement, Abadi said that Iraq is still producing less than it should.

On Monday, oil prices increased 2% after Reuters reported that Iran is sending positive signs of supporting a joint OPEC movement to improve the market.

This week, supplies at the storage facilities at Cushing increased by 417,000 barrels according to the API figures, against a more conservative expected 200,000-barrel build. In the week prior, crude oil inventories at the site were down by 680,000 barrels according to actual EIA data.