Iran, S. Arabia Discuss Oil Market

Iran, S. Arabia Discuss Oil Market
Iran, S. Arabia Discuss Oil Market

Iran’s oil market position is close to that of Saudi Arabia, oil minister Bijan Namdar Zanganeh said, with less than 24 hours to go until OPEC nations meet in Vienna to formulate a response to tumbling crude prices.

“I met minister Naimi and we will continue our discussion,” Bijan Namdar Zanganeh was quoted by Reuters as saying in the Austrian capital, talking after discussions with Ali Al-Naimi, his Saudi counterpart.

“It is very important for us to have unity inside OPEC. We didn’t discuss only about the cut, but we discussed the market situation and our position is close to each other.”

Al-Naimi said earlier today crude prices that plunged by a third since June will stabilize while Zanganeh told reporters Iran wouldn’t request an output cut by Saudi Arabia at Wednesday meeting.

Iran would not cut its oil production regardless of what OPEC ministers decide at a meeting on Thursday because output from the country is already significantly reduced, oil minister Bijan Zanganeh was quoted by Platts as saying.

Arriving in Vienna for Thursday’s meeting of OPEC ministers, Zanganeh said it was also important for non-OPEC producers to contribute to helping keep supply and demand in balance given the recent 30% fall in global oil prices. Asked whether Iran would reduce production if OPEC countries agreed on a cut, Zanganeh said “never.”

“We are producing under our share,” he said, adding that no one would expect Iran to reduce its output. Iran produced around 2.83 million b/d last month, according to Platts estimates, well down from the 3.6 million b/d the country was producing in late 2011 before international sanctions against Tehran limited its exports. Asked what Iran’s position was regarding the OPEC talks, Zanganeh said: “We need to speak to others and exchange views with them on how to deal with the situation. The most important thing for all of us is the unity and solidarity of OPEC.”  He said some OPEC members, but not Iran itself, believed it was time to defend market share in the face of growing supplies from non-OPEC nations.

  Non-OPEC Contribution

Zanganeh also said that non-OPEC countries should make an effort to help rebalance the market given the recent sharp fall in oil prices. “In this situation I believe we need to have the contribution of non-OPEC producers for managing the market,” he said.

On Tuesday, Saudi Arabia’s oil minister Ali Naimi met with top oil officials from non-OPEC Russia and Mexico, as well as fellow OPEC member Venezuela, to discuss the current oil market, but the four sides did not agree on reducing production to shore up prices.

Asked by how much he thought OPEC could reduce production as a whole, Zanganeh said: “At the moment, I cannot talk about a number. We must talk with our colleagues. What is a given is that OPEC never forgets its responsibility about adjusting the income of its members. And OPEC has showed that under very difficult conditions it can manage the issues with its wisdom.”

“We cannot decide without consensus and we need approval of all OPEC members to reach our decision. OPEC has a maturity, unity and solidarity for any decision [to] maximize the benefit of the producers and OPEC members,” he said.

  Price Concern

With prices having lost some $35/b of their value since mid-June, producer countries that are heavily dependent on crude export revenues have taken a major hit. “I can’t talk about a number that the price should go back to,” Zanganeh said. “But at the moment, it can be said that almost nobody among the producers finds these conditions favorable,” he said. He added that Iran and other market experts agreed that the market was currently oversupplied and it would continue to be oversupplied in 2015. “Next year we will have more oversupply,” he said.

  Russian Output Steady in 2015

Russian oil companies will keep production steady in 2015, energy minister Alexander Novak said on Wednesday, after Moscow left a meeting with other major oil producers with no agreement on how to address weak oil prices.

After talks between Saudi Arabia, fellow OPEC member Venezuela and oil power Mexico ended without an agreement on Tuesday, Russia’s message was clear - daily average oil production of around 10.5 million barrels will be maintained.

“We have got the plans which companies have embarked on for next year: (output) will be along the same lines as this year,” Novak told reporters. Russia is hoping to keep output stable by exploiting new areas such as the Bazhenov oil formation and Arctic offshore.

Novak, who was in Vienna on Tuesday, also said he was skeptical that OPEC would decide to cut output quotas to shore up oil prices which have fallen to around $78 per barrel.

He said that lower oil prices would close ineffective oil projects, decreasing output to support prices which should return to a “fair level”.

Brent crude oil steadied below $79 a barrel on Wednesday after Saudi Arabia signalled it was unlikely to push for a major change in OPEC oil output despite a collapse in prices.

Oil prices have dropped by a third since June and some OPEC members have called for the cartel to reduce production sharply in an attempt to tighten the market. Predictions for the OPEC meeting range from a large output cut to no action at all.