Oil recovers as Iran confirms it will meet OPEC in Algeria

Fuelling speculation of co-ordinated action to prop up prices in the face of persistent oversupply

Oil prices reversed their losses on Thursday after Iran confirmed it would attend a meeting of Opec ministers in Algeria next month, according to the country’s state news agency Shana.

 For several days oil prices had escalated in response to reports that Bijan Zanganeh would attend the gathering on the sidelines of an industry conference in late September.

This has fuelled speculation that Iran may take part in any co-ordinated action among producer countries to prop up the oil market. Iran has still not said it will soften its stance for joining in any output limits.

Earlier this year, talks for a production freeze between Opec and countries outside the cartel such as Russia ended in failure after Saudi Arabia refused to participate in any deal without Iran.

Tehran did not attend the April gathering in Doha and said it would not curb its production until it had reached levels it had before the imposition of Western sanctions on its oil industry.

Iran has been boosting output since restrictions were eased in January but production still stands at 3.85m barrels a day, the country’s president Hassan Rouhani said on Thursday. This is short of pre-sanctions levels above 4m b/d, calling into question Iran’s ability to reach this level.

In recent weeks Opec producers, including Venezuela, have made renewed attempts for co-operation after oil prices came under pressure again, dropping towards $40 a barrel in July.

The new Opec secretary-general Mohammed Barkindo is due to visit Iran and Qatar early next month, a person familiar with the situation said.

Iran and Ecuador on Wednesday discussed ways the two countries can strengthen their positions in oil markets, said Iran’s Foreign Minister Mohammad Javad Zarif on Wednesday.

Ecuador, which is among Opec’s smallest producers, has consistently supported Venezuela’s push over the past two years for production limits even as economically stronger members have remained more focused on retaining market share.

Saudi Arabia’s energy minister Khalid al Falih told Reuters on Thursday there are no “discussions of substance” yet on Opec production levels. He said he did not believe any significant intervention in the market was neccessary.

Speaking from a business summit in California, he said Saudi production in August has held around last month’s record levels, when it reached 10.7m b/d.

Mr Falih said earlier this month the kingdom could participate in co-ordinated action to help balance the oil market if needed.

While analysts are still sceptical about any deal next month, they also say a production freeze will do little for market balances as many producer countries are pumping at heightened levels.

Iraq’s prime minister said on Tuesday the country had not fully regained its lost market share, signalling his government may not restrain its crude production as part of any possible deal.

Brent crude edged higher by 45 cents to $49.48 a barrel in afternoon trading, after falling as low as $48.70 a barrel. The US marker West Texas Intermediate increased 26 cents to $47.03 a barrel following a drop to $46.42.

Earlier in the day traders remained focused on US energy department data published on Wednesday which showed high levels of oil stockpiles. Commercial crude oil stocks rose 2.5m barrels to 523.6m barrels, signalling a persistent supply overhang.