Oil inches up as Iran holds key to output freeze agreement

Iran's output is at least one million bpd below its capacity while Saudi Arabia and Russia are producing at the higher limits of capacity.

Asian shares rallied and oil prices inched higher on Wednesday after Saudi Arabia and Russia agreed to freeze production levels, paving the way for what would be the first global deal to cap crude output.

The world's top two producers and exporters, however, said their decision to freeze output levels was contingent on other producers, especially Iran, joining in.

Brent crude gained 40 cents to rise to $32.58, and the US crude was up 19 cents at $29.23, on hopes the output freeze proposed by major producers will come into effect.

Benchmark Brent crude had slipped 2 percent on Tuesday on fears that Iran would reject a Saudi-led deal to limit output.

"Albeit mostly symbolic, it is one of the first clear acknowledgments by the oil heavyweights that all is not entirely well in the current price environment," Helima Croft of RBC Capital Markets, said in a note.

The Shanghai Composite Index gained 0.6 percent and South Korea rose 0.2 percent while Japan's Nikkei eased 0.2 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.2 percent, having climbed 3 percent over the previous two sessions.

OPEC members Qatar, Venezuela and Kuwait also agreed to put a cap on production and Iraq indicated it would abide by an output freeze if there is unity among all producing countries.

However, Iran, which recently emerged from international sanctions that limited its oil sales, has pledged to steeply increase output.

Different situation

"Our situation is totally different to those countries that have been producing at high levels for the past few years," Reuters quoted an Iranian source as saying.

Iran's crude output is at least one million barrels per day below its capacity while Saudi Arabia and Russia are producing at the higher limits of their capacity.

"It requires discussion and examination to be seen what has been their point," Iranian Oil Minister Bijan Zanganeh said.

"What is important is that, first, the market is oversupplied, and, second, that Iran will not overlook its quota," he added, according to Iranian news agency Shana.