Oil price rises ahead of OPEC talks with Iran 

Skepticism has mounted over the possible freeze mooted Tuesday and Iran has already voiced resistance to joining the deal before talks in Tehran have even begun.

Benchmark U.S. WTI light sweet crude was 1 percent higher at $29.33 a barrel at 10.00 a.m. London time, while European Brent crude rose 1.2 percent to $32.56 a barrel. On Tuesday, WTI settled 1.4 percent lower in the Asian session after gaining as much as 7.1 percent intraday; Brent settled 3.6 percent lower after jumping 6.5 percent intraday on hopes of a supply cut deal.

The price gyrated Tuesday on supply-cut hopes ahead of a meeting of top exporters in Doha, Qatar. Those hopes were dashed when Russiaand Saudi Arabia agreed to freeze output at January’s levels instead. Qatar and Venezuela have already agreed to participate but the deal was also contingent on other producers joining in. Iranian Oil Minister Bijan Zanganeh will meet his counterparts from Venezuela, Iraq and Qatar at 10.30 a.m. London time, according to Reuters.

It could become the first joint OPEC and non-OPEC deal in 15 years, as oil producers seek to boost persistently low oil prices. The energy commodity has declined 70 percent since the summer of 2014.

Iran, which was not present on Tuesday’s meeting, planned to increase output by at least 500,000 barrels a day this year following the liftingof Western sanctions last month. On Wednesday, Iran’s OPEC envoy told Shargh newspaper that it was “illogical” to ask Iran to freeze its oil production level, Reuters reported.

“Asking Iran to freeze its oil production level is illogical … when Iran was under sanctions, some countries raised their output and they caused the drop in oil prices … how can they expect Iran to cooperate now and pay the price?,” Mehdi Asali was quoted as saying.

Market watchers received news of the deal with skepticism because not only do Iran and Iraq need to agree to the freeze, but even if the deal went ahead, it would be unlikely to solve the problem of a supply glut.

Russia pumped a post-Soviet Union record high of 10.88 million barrels a day in January, while Saudi Arabia’s output was near its record high around 10.2 million barrels a day, senior commodities editor at The Economist Intelligence Unit (EIU), Sebastien Marlier, said.

Questions were also raised over whether Russia and indeed Saudi-dominated OPEC itself would be disciplined enough to respect the agreement.

“The success of the deal will depend on Russia playing its full part,” said Capital Economic’s head of commodities research, Julian Jessop.

“The track record here is not good – Moscow reportedly reneged on a similar deal in 2001, although the stakes are arguably higher now,”

Russia also failed to respect a similar agreement with OPEC producers in the 1990s, added EIU’s Marlier.

Meanwhile, OPEC was believed to already be pumping above its previous 30 million barrel-a-day ceiling as producing countries sought to pump up volume to offset losses from sliding prices. The oil cartel was pumping 33.1 million barrels a day recently, noted London-based Capital Economics.

Dennis Gartman, founder and publisher of “The Gartman Letter”, told CNBC’s “Fast Money” that the mooted deal – which he called “the last great hope for oil” – was a huge disappointment.

“Anybody who even thought there would be talk of a production cut have to know that the one thing [you] can know about OPEC is they cheat. They cheat on everything. Even if they had announced a production cut, nobody would have taken it seriously but this was really a great disappointment,” he said.

Most importantly, any meaningful recovery in oil prices in an oversupplied market would undermine Saudi’s long-standing strategy of not cutting supply to squeeze out higher-cost producers such as U.S. shale companies. A resurgence in shale output would then add to the existing over-supply problem.

“If the other producers do not agree, then little will change, but even if they do, any significant price recovery could increase the incentives for U.S. shale output to start growing again,” Barclays analysts Miswin Mahesh and Kevin Norrish said in a note.