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OPEC had an output ceiling of 30 million bpd until December.
OPEC had an output ceiling of 30 million bpd until December.

Reinstating OPEC Quota Key to Market Balance

Reinstating OPEC Quota Key to Market Balance

A top Iranian Oil Ministry official called for reinstating the production ceiling at the Organization of Petroleum Exporting Countries to restore oil market balance.
"The quota system was scrapped because of unrestrained production of some countries. We need to find a solution to revive the quota system and turn OPEC into a strong policymaking organization it once was," said Amirhossein Zamaninia, deputy oil minister for international and commercial affairs.
He made the statements on the sidelines of a meeting with Algeria's Minister of Energy Noureddine Boutarfa in Tehran late on Saturday.
The official was referring to fellow OPEC producers, such as Saudi Arabia and Iraq, who have effectively abandoned the group's ceiling by adding more barrels to an oversupplied market when Tehran's production was curtailed after tighter sanctions were imposed on its nuclear program in 2011 and 2012.
According to OPEC's monthly report published in August, Iran is currently the third largest OPEC producer after Saudi Arabia, the group's de facto leader that posted a record output of 10.67 million bpd in July and second-placed Iraq that produced 4.6 million bpd.
Until last December, OPEC had a production ceiling of 30 million barrels a day, a mark it routinely exceeded by more than 2 million barrels a day.
OPEC stopped setting production quotas for individual members in 2011 and abandoned an output ceiling entirely in December last year.
Oil traded above $100 per barrel in mid-2014, but prices crashed to multi-year lows in January before paring some losses. Oil briefly entered a bull market last month but has since held at $45 per barrel.
OPEC members maintained a stable production figure for the past nine years, averaging 30 million barrels a day, but the group's output averaged 31.8 million bpd, according to OPEC's annual report.
At the same time, shale boom also accelerated the slump in market as US crude production rose to a record high of 9.32 million bpd by the end of 2014, the highest number since October 1970.

------- Saudi-Led Policy
Since reaching an agreement with world powers on its nuclear program in July last year, Iran has ramped up the rhetoric against OPEC's Saudi-led policy of flooding the market with excess oil to drive out higher cost producers.
In a statement in November, Oil Minister Bijan Namdar Zanganeh said the removal of crude production ceiling by OPEC was a “huge and historic mistake”, adding that correcting this blunder would be extremely difficult.
OPEC states will gather in Algiers, Algeria, later this month to discuss an initiative to cap crude output to boost prices after a similar drive ended in stalemate in April.
Zanganeh is slated to attend the meeting but he has implied that Tehran is not yet willing to join the pact that would also include non-OPEC producers such as Russia.
Tehran says it will be ready to discuss an output freeze deal once it reaches its pre-sanctions production level of around 4 million barrels a day. It is now producing 3.8 million bpd, according to data provided by the Oil Ministry.
Some analysts suggest that any accord on a freeze plan will have little impact on prices, as long as the global oil glut persists.
“It’s more symbolic. The production freeze doesn’t do anything. To have a meaningful impact on prices, you need a production cut," said Mike Coleman, founder of Singapore-based hedge fund, RCMA Asset Management Pte Ltd. in an interview with Bloomberg last week.

 

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