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Commodities

Regional rivalry thwarts oil production freeze

DOHA, Qatar -- A meeting Sunday here among major oil-producing nations to hammer out a deal to freeze increases in output ended without an agreement, as the rivalry between Saudi Arabia and Iran trumped the pursuit of common interest.

     Some countries changed their attitude at the very last minute, Russian Energy Minister Alexander Novak said.

     Novak refrained from naming Saudi Arabia as one of those countries, but it was apparent where his frustration was directed, since the Mideast oil powerhouse's change of heart was a major reason why Novak had just departed a 12-hour meeting empty-handed.

     It appears that the Saudis, Russia and 16 other major oil-producing nations came to the gathering with an understanding that an agreement to freeze outputs at the January level until October would be within reach. But Saudi Arabia apparently insisted once the meeting began that it would not sign an agreement unless Iran was part of the deal.

     Following the lifting of international economic sanctions in January, Iran has been racing to bring its daily oil output back up to the level before the sanctions. The country used to produce 4 million barrels a day, but the volume has fallen to 2.8 million. Iran was going to send a representative to the Doha meeting, but suddenly decided to skip the gathering.

Sunni-Shia conflict casts shadow

At a meeting in Turkey on Friday, the Organization of Islamic Cooperation adopted a joint communique condemning Iran for interfering with internal politics of neighboring countries. The statement was clearly aimed at putting pressure on Tehran's efforts to support Shia factions in largely Sunni neighbors, such as Syria and Yemen. The criticism of the dominant Shiite nation likely was orchestrated by Saudi Arabia, the leader of Sunni Muslim countries. Iran on the next day said it would not attend the Doha meeting.

     Some expected that the Saudi Arabia would set aside its feud with Iran, which escalated to severing of diplomatic ties in January, and sign a production freeze to push up oil prices. But Riyadh, in the end, apparently decided that it would rather endure low prices than see the agreement help Tehran by lifting them.

     OPEC is expected to discuss an output freeze at its next general meeting on June 2, but the chance of the oil cartel reaching an agreement there is slim.

     Some even see an increased possibility of the opposite happening. For instance, Adam Longson, chief energy analyst at Morgan Stanley, says there is now a growing risk of OPEC members moving to lift production to defend their market shares in the face of Iran's output hike.

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