For the oil industry, this is what passes for good news:
Iran said Wednesday that it would be great if other countries would limit their oil production to boost prices.
As for itself, Iran will continue to ramp up oil production.
That may not sound like much reason for celebration, but Iran’s expression of support for a multination plan to restrain oil output was enough to give the energy market a boost. On the New York Mercantile Exchange, West Texas Intermediate crude oil gained $1.62, or 5.6 percent, to settle at $30.66 a barrel.
The uptick followed a coordinated effort, led by Saudi Arabia and Russia, to push up oil prices from the lowest levels in a dozen years. On Tuesday, those two countries, along with Qatar and Venezuela, agreed to freeze their oil output at January levels. They hope that by restraining the growth in production, they might trim the global oil glut.
But to make the plan work well, they would need the participation of Iran. So on Wednesday, oil ministers from the four countries went to Tehran to try to talk Iranian officials into signing on as well.
After the meeting, Iran’s oil minister Bijan Zanganeh applauded the plan to restrain output. Having the other four countries “freeze their production ceiling in a bid to stabilize the market and improve prices … [is] supported by us,” Zanganeh told reporters. “This is good start.”
Iran, however, will not participate for now. “One should wait to see its effect on prices,” he said.
Just having Iran wait and see was, apparently, enough to encourage some investors to believe prices will rise. But analysts at Goldman Sachs said that even if the Saudi-Russia output freeze were to work, it would not be enough to send prices significantly higher.
“While an agreement could create the perception that more could be achieved, such as production cuts, we believe this would not be sufficient to set a floor on prices,” according to Goldman.