Russia to Buy Iranian Crude Oil

Tehran and Moscow are close to signing an agreement for the export of 100,000 barrels per day of Iranian oil to Russia, Oil Minister Bijan Namdar Zanganeh said on Tuesday.

"The two sides will seal an agreement on oil export to Russia within two weeks," Zanganeh said on the sidelines of a meeting with Russian Energy Minister Alexander Novak on Tuesday, Shana reported.

Novak traveled to Tehran on Monday with a delegation for breaking ground on a 1,400 megawatt thermal power plant to be built in the southern city of Sirik, Hormozgan Province, with Russian assistance.

"Russia will pay for 50% of its future oil imports from Iran in cash and the rest will be paid in kind," Zanganeh said without giving details.

Russian companies have signed memoranda of understanding with Iranian companies, he said, adding that bilateral negotiations on oil and gas contracts are at an advanced stage and Iran is waiting for proposals on contracts from Russian companies.

“We were ready to sign the contract tonight but our Russian counterpart was in a hurry and had to leave,” Zanganeh said. 

Novak has put the potential of the agreements on exploration and production of oil and gas in Iran at $20 billion. "The potential in this sphere could be valued at about $20 billion," Novak was quoted as saying by Sputnik.

 OPEC Deal

Zanganeh hailed a historic accord between members of the Organization of Petroleum Exporting Countries and some non-OPEC producers including Russia to cut daily oil supplies by 1.8 million barrels.

"Russia is part of a five-nation committee (along with Kuwait, Algeria, Venezuela and Oman) that monitors the implementation of supply cut. Moscow has a pivotal role in the agreement by pledging to cut output by 300,000 barrels a day," noted the senior oil official.

Russia has reportedly delivered a third of the 300,000 bpd in cuts it promised. 

Under the deal, to be effective in the first half of the year, Iran was the only country allowed to slightly raise its production from October output levels. The No. 3 OPEC producer is bound to produce an average of 3.8 million bpd in the period.

Saudi Arabia, OPEC's de facto leader, has shouldered more than 40% 0f total OPEC cuts. The kingdom's January production was 9.98 million bpd, much less than its quota of about 10.06 million, according to the International Energy Agency.

Acceptable Range 

Zanganeh also said on Tuesday that the rally in oil prices since OPEC agreed its output cut deal at the end of November is unlikely to extend above $60 a barrel as higher prices will encourage US shale producers to bring more rigs into operation and ramp up production.

"Most OPEC members believe that $55-60 is an acceptable range for oil prices," Zanganeh said. International benchmark, Brent, traded at around $56 per barrel on Tuesday. 

He added that US President Donald Trump's pick for the secretary of state, Rex Tillerson, signals that the new US administration is pro-oil.

"Appointing the chief executive of US energy major Exxon Mobil as secretary of state is certainly good news for oil companies in the United States. OPEC nations should be wary of the new developments in the oil market."