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OPEC Should Make Room for Iran’s Oil

OPEC Should Make Room for Iran’s OilOPEC Should Make Room for Iran’s Oil

Iran has asked OPEC to accommodate its return to previous production levels when international sanctions are lifted, Oil Minister Bijan Namdar Zanganeh said.

"OPEC should make room for increased Iranian crude production within its ceiling of 30 million barrels a day," he said, adding that the group will probably leave that limit unchanged when it meets next month, Bloomberg reported.

According to Amirhossein Zamaninia, deputy oil minister for international affairs, the extra output should be within OPEC’s production ceiling.

Zanganeh added that most OPEC members see $70 a barrel as a fair rate.

Brent Crude last traded at that level in December, days after OPEC gathered in Vienna and decided to resist calls from members, including Venezuela, to cut output. Brent settled near $45 a barrel in London on Nov. 20.

On whether disagreements between members of the Organization of Petroleum Exporting Countries and Russia, a non-OPEC producer, have affected global crude prices, he said, "Russia is not a member and the decisions of OPEC members should not be bound to external factors."

Zanganeh called for "convergence" inside the organization and said there is a "political force to keep oil prices low", ISNA reported.

He reiterated that Tehran does not need OPEC's permission to increase oil production.

"To increase Iran's oil production in the global market after the lifting of sanctions, we don't need permission from OPEC or any other organization," he said.

The Persian Gulf country plans to raise crude output by 500,000 bpd within a week after the removal of sanctions and add 1 million bpd over the following six months.

  Managed Return

“I don’t expect to receive any new agreement” at the OPEC meeting, Zanganeh said. “OPEC is producing more than its approved ceiling and I asked them to reduce production and to respect the ceiling, but it doesn’t mean we won’t produce more, because it is our right to return to the market.”

Iran was OPEC’s second-largest producer before sanctions over its nuclear program were tightened in 2012. The nation, which reached a landmark nuclear deal with six world powers in July, is currently the group’s fifth-largest supplier, pumping 2.7 million barrels a day, according to data compiled by Bloomberg last month.

“I sent a letter to OPEC to consider our return to the market and to manage it,” Zanganeh said. “We don’t need to receive any permission from any organization for our return to the previous level of production. It is a sovereign right.”

Brent Crude tumbled more than 60% since the middle of last year, as OPEC followed Saudi Arabia’s strategy of defending its share of the global market against competitors such as US shale producers.

OPEC, which accounts for about 40% of global supply, has been pumping above its target level for 17 months. It is scheduled to meet on Dec. 4 to discuss the ceiling.

Speaking on the sidelines of the Gas Exporting Countries Forum ministerial meetings in Tehran, Zanganeh said politicizing natural gas production and export would jeopardize global gas market in the long run.

Holding the world's largest natural gas reserves, Iran and Russia have called for implementing a mechanism to maintain gas trade among GECF members to cancel out the effect of sanctions and politically-driven forces on gas trade.

GECF members together control over 70% of the world's natural gas reserves, 38% of the pipeline trade and 85% of the liquefied natural gas production.

  Market Balance

Venezuela President Nicolas Maduro is scheduled to meet Russian President Vladimir Putin in Tehran on Nov. 23 to "work together" on oil prices, he said on state television last week.

Moscow is facing competition in Europe after Saudi Arabia reduced pricing for buyers in northwest Europe and started selling in established Russian markets such as Poland.

Russia was lobbied last year by Venezuela as it sought to coordinate action with non-OPEC producers to halt the collapse in oil prices.

Russian Energy Minister Alexander Novak said in Tehran on Saturday global supply and demand are best balanced by the market.

"Any discounts on Russian crude are a matter for the oil companies and not the Energy Ministry," Novak said.

Financialtribune.com