DOHA, April 21, (RTRS): The failure of OPEC and non-OPEC producers last week to agree to freeze oil output was unsurprising given the market’s volatility and future such negotiations are unlikely to prop up crude prices, a senior US energy official said on Thursday.
With the world awash with oil and Iran ramping up its production after the lifting of sanctions, an output freeze — the basis of a meeting that fell apart in Doha on Sunday — is unlikely to address oversupply in the market, Amos Hochstein, US Secretary of State’s Special Envoy for International Energy Affairs, told Reuters in Doha.
“Oil markets are very volatile. Artificial intervention in the market comes with risk and that is why it is best to let the markets rebalance themselves.”
“I don’t think that this (OPEC, non-OPEC meeting) will solve things,” Hochstein said.
Oil prices have fallen by as much as 70 percent since mid-2014 as producers have pumped 1 to 2 million barrels of crude every day in excess of demand, leaving storage tanks around the world filled with unsold fuel.
Sunday’s meeting in Qatar’s capital Doha had been expected to finalise a deal to freeze output at January levels but it fell apart after top oil exporter Saudi Arabia demanded that Iran should also sign up.
Iran did not attend the Doha talks and has said it would not freeze its production as it seeks to regain market share post-sanctions.
“I don’t see it as a surprise when they (Iran) publicly announce that they don’t want to freeze production at the sanctions level,” he said. “Iran has been under sanctions for the last several years and today they are free to re-enter the market.”
Hochstein said that Iran had skilled engineers and technical abilities honed during sanction years but that a return to the market would not be easy.
“Iran is going to have to offer very attractive terms indeed to entice investors,” he said.
Hochstein’s trip to Qatar, the world’s largest Liquefied Natural Gas (LNG) exporter, comes at a sensitive time as the United States emerges as a global LNG exporter and is seeking to allay Gulf countries’ fears over Iranian influence.
The US has increased its production of shale oil in the past decade from half a million barrels to over 9-1/2 million barrels a day and by 2020 will export similar amounts of gas as Qatar, said Hochstein.