Crude prices rose to $35 per barrel after Iran accepted the Russian-Saudi agreement to freeze oil output. The Persian country, however, has shown no indication it’s willing to comply with the agreement unless an exemption is made.
The surge in oil prices — which hit a nadir of $32 a barrel Tuesday, rose above $34 overnight and hit $35 by Thursday morning — came as analysts warned the agreement is unlikely to have any appreciable effect on oil markets.
“It’s a continuation of yesterday’s move,” Carsten Fritsch, analyst at Commerzbank, told reporters Thursday. “What we see still is extreme volatility. I would not be surprised to see prices retreating again by a big margin in coming days.”
“Such a freeze will have little impact on the oil market as proposed, while there remains high uncertainty that it even materialises, in our view, “Goldman Sachs analysts noted in a statement to its clients. “As a result, our oil supply and demand estimates remain unchanged and we reiterate our view that oil prices will remain volatile,” the statement continued.
The flow of oil in the market is becoming increasingly volatile thanks in part to Iran’s decision to play its cards close to the chest, with Iranian officials suggesting the move to freeze outputs, but the country still intends on pumping oil.
Bijan Zanganeh, Iran’s oil minister, joined officials from Venezuela, Iraq and Qatar Wednesday to discuss the agreement, but refused to say whether the country would follow Russia and Saudi Arabia’s lead and cap its output.
“Iran is saying, ‘We are not playing with you,’” John Hall, chairman of the London consultancy Alfa Energy told reporters. “If Iran is working outside OPEC, the group cannot move. OPEC cannot do anything without Iran.”
The price of oil has collapsed from its $100 per barrel highs in 2014 to the lackluster lows of the current $35, which is due in large part to OPEC’s willingness to keep the spigots open and deluging the market with cheap oil.
Helping the price uptick was news that U.S. oil reserves dropped to 3.3 million barrels last week from the 3.9 million barrels that was expected, according to a report issued by the American Petroleum Institute.
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