The Fate of Oil Prices Depends on the Principles of OPEC and OPEC Member State Iran

• 10.09.2016, 16:28
• Lilia Amirkhanyan
•  "Insight" Analytical Center ,  Analytics

The flow of headlines about changes in oil prices is still active. By the way, the prices change daily. The reason is the continuing uncertainty in the oil market, which seemed to soften after the informal meeting of OPEC member countries held in Algeria few days ago. To remind, at the meeting it was agreed to freeze the volumes of oil production at the level of 32.5-33 million barrels per day starting from November of this year.

Immediately after that agreement was reached Iran came up with a statement about its intention  to increase the volumes of crude oil to 150 thousand barrels daily in the coming months, which will bring the daily volume of 2.2 to 2.35 million barrels.

Naturally any achieved positive result in all this chaos associated with oil production, assumes similar positive effect on the markets. As a result of this on the first days of October, the oil price reached $ 50 per barrel threshold. On the other hand the announcement about the increase of oil production volumes impacts the same markets.

To make it logical, it must be noted that at the aforementioned meeting of OPEC countries the assumed reduction of oil production volumes mainly  referred to Saudi Arabia, while Iran, on the contrary, should be allowed a slight increase in volumes. All this, according to the official OPEC statement, should take place no earlier than November. However, the haste of Iran, according to some countries, already questioned the implementation of the agreement. This, of course, will have an ambiguous effect on the markets until November, periodically raising and lowering prices.

On the other hand it should be noted that OPEC's position has been tough enough for the recent period, as the "information war," not to concede any barrel, ongoing since last year, especially manifested between Saudi Arabia and Iran, is not excluded to exacerbate inner problems within the organization.

It is also clear that before the decision was announced, the countries held negotiations and all parties gave their consent, but the oil market will continue to stay sensitive to any new statement or event concerning this issue. This will continue until there is no statement by OPEC in response to Iran's statement; the one which will either explain the increase in oil production by Iran, reiterating that it is already a reality, or will force Iran to wait until November.