Calls for Reinstating OPEC Quota System

Calls for Reinstating OPEC Quota SystemCalls for Reinstating OPEC Quota System

Increasing strain on ties between the member states of the Organization of Petroleum Exporting Countries is beginning to show, following suggestions by Iran and Algeria in an internal OPEC report seen by Reuters that call for a return of the group's quota system, which was dropped in 2011.

The suggestions are contained in 11 pages of comments from member countries on the 44-page report, which was prepared by OPEC's research team in Vienna, Ship and Bunker reported.

Iran reportedly wrote that OPEC's 30 million barrels per day ceiling, which does not specify quotas for individual members, "has not effectively contributed to oil market stability … some of the OPEC member have enhanced their production rate based on their production capacity without paying attention to the production ceiling."

Iran, which intends to regain market share when sanctions against the country are lifted, added that the "OPEC production ceiling should be set for 6- or 12-month intervals proportionate to the estimated call on OPEC and then allocation of production for every member country could be agreed upon."

Algeria also wrote, "OPEC should be prepared to establish and defend a price floor, in particular, and to accept a temporary tradeoff between lower market share and higher revenues."

Algeria also suggested that "it might eventually be necessary to revisit the quota system to make production management as realistic and equitable as possible".

Iraq took a different tack. "OPEC member-states should determine their own policies regarding the long-term strategy by creating a model for achieving maximum revenue through a balance between market share and prices," it wrote in the report's commentary pages.

Iran, Iraq and Algeria are said to be among OPEC members suffering the most due to the drop in oil prices, which are now less than half of what they were as recently as June 2014.

OPEC sources stated that although a decision to restore the quota system will be determined by the ministers when they meet on December 4, core Persian Gulf Arab members of OPEC oppose the initiative.