Oil prices surge as Iran signals tough line to freeze production

Oil prices rose on Wednesday as efforts led by Russia and Saudi Arabia to broker a deal to freeze production levels and ease a global glut turned to Iran, which signalled a tough line.

Iranian Oil Minister Bijan Zanganeh will meet his counterparts from Venezuela, Iraq and Qatar in Tehran. An Iranian official earlier said Iran would continue increasing its crude output until it reached levels seen before the imposition of international sanctions.

"Asking Iran to freeze its oil production level is illogical," Iran's OPEC envoy, Mehdi Asali, was quoted as saying by the Shargh newspaper.

Brent crude rise up to $32 a barrel 

Brent crude was up 28 cents at $32.46 a barrel, after settling down $1.21 in the previous session. U.S. crude rose 16 cents to $29.20 a barrel.

Under a proposal that could lead to the first global oil production deal in 15 years, major producers would freeze their output at January levels. But Saudi Arabia said on Tuesday that the deal depended on the cooperation of other big producers.

Iran, the Organization of the Petroleum Exporting Countries' fourth-largest producer, might be offered an exception as it seeks to ramp up production following the removal of sanctions over its nuclear programme last month, said Ildar Davletshin, analyst at Renaissance Capital.

FGE says freezing output won't be enough to clear the 600,000 barrels 

Moves to freeze output at January levels will make little difference to the overall supply-demand balance this year and not be enough to clear the 600,000 barrels per day surplus projected for the year, analysts at FGE said in a note.

"It could pave the way for further action to be taken should the likes of Saudi Arabia, other OPEC members and Russia deem it necessary," FGE said.

Still, a deal would signal a change in Saudi Arabia's stand.

"The deal doesn't add much to rebalance the market, but it is still important that the parties talk. The Saudis are no longer saying they are fighting for market share but that they are ready to discuss a deal," Davletshin said.

Investors are also eyeing U.S. oil inventory data later on Wednesday and on Thursday for further direction on prices, with a poll of analysts suggesting a gain of 3.9 million barrels in crude oil stocks last week.