Oil output freeze - meaningless, says US expert

Oil output freeze - meaningless, says US expert

Baku, Azerbaijan March 4

By Elena Kosolapova - Trend:

The agreement on freezing the oil output at January levels, which has already received support from a number of countries, is theater and is not meaningful, Arthur Berman, an independent US geological consultant with thirty-seven years of experience in petroleum exploration and production believes.

"It has contributed to a sentiment-based rally in crude oil prices over the last several weeks but is otherwise meaningless," Berman told Trend.

Energy ministers of Russia, Saudi Arabia, Venezuela and Qatar agreed to freeze the oil output at Jan.11 level. Later, Russia's Energy Minister Alexander Novak said that over 15 countries have joined this initiative.

"First, a freeze on production does nothing to address the over-supply of oil in the world - only a cut would accomplish that," Berman said.

Second, the expert noted, that most of the countries involved in the discussions on freezing oil production level are currently producing at or near their maximum capacity so a freeze is nothing more than the status quo.

Third, according to Berman, Iran, which has huge oil reserves, has not and will not agree to a freeze because they need the money and this is the one of the bigger short-term trade-offs for the nuclear agreement.

Finally, the Middle Eastern members of OPEC - Saudi Arabia, the UAE and Kuwait are a block and control half of OPEC production - and Russia reflect the deep geo-political rifts.

He noted that Russia and Iran are fighting a war against proxies of Saudi Arabia, Kuwait, Qatar and the UAE in Syria.

This is, among other things, a Sunni-Shia split, Berman said, adding that moreover, Iraq, which also one of the biggest oil producers, is Shia and a satellite of Iran.

"To think that these countries could agree on anything is improbable," expert said.

For oil prices to increase, the biggest over-producers, the U.S., Iraq, Brazil and Canada along with Iran, must decrease their output, according to Berman.

"None of these countries are involved in the so-called freeze discussions," the expert said.

The price of May futures for Brent oil was $37.17 per barrel on March 4 morning. Meanwhile, the price of April futures for WTI oil was $34.79 per barrel.

Edited by SI

Follow the author on Twitter: @E_Kosolapova

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