As Nigeria grapples with an exchange rate debacle that is escalating prices of goods and services an important meeting is taking place in Tehran the capital of Iran.
According to Reuters, OPEC members are traveling to Iran to discuss with the country about its plans to resume export of crude oil. Iran was recently welcomed back to the international community after a deal that ended years of sanctions by the US and other Western nations.
Why are they going to Iran? Saudi and Russia (non OPEC) agreed a deal on Tuesday that will see both countries freeze the level of oil that they produce to the levels attained in January 2016. This means, they and other OPEC country will not be increasing production going forward, a situation that worsens the oil glut and impacts negatively on the price of oil.
But for this to work, they will have to reign in on Iran who understandably is seeking to scale up production to the levels it was before sanctions were applied on them. Unfortunately, this is bad timing as the world needs production levels to drop if oil price is to at least rise to $40 by the end of the first quarter of 2016.
According to Dolapo Oni, Head Research Oil and Gas Desk at Ecobank, “OPEC is sacrificing what is has fought for the most which is market share. They are basically trying to rein in on their members to create a bond that hasn’t existed in recent times.”
Oil Prices could rise again if this meeting ends successfully and with all parties agreeing to freeze output. According to Dolapo Oni, “if the meeting is positive oil prices will hit $36 today”.