Oil Supply Cuts Bailed Out Small Producers

A deal by members of the Organization of Petroleum Exporting Countries to cut crude supplies in the first half of the year was an important achievement that helped members avert a "disaster".

"For small and average oil producers, the period before the supply cut agreement was a disaster," Zanganeh was quoted as saying by ILNA on Wednesday.

OPEC, which is responsible for nearly 40% of global crude supplies, reached a historic deal last year to slash production by 1.8 million barrels a day to prop up prices which had plunged to $27 per barrel in February 2016, the lowest in more than a decade.  Saudi Arabia, the world's top exporter, is responsible for 40% of the cuts, or 486,000 barrels a day.

The deal was a rare display of consensus among the 13-member bloc who last agreed on a collective output cut in 2008 amid a global economic slump and a $40-per-barrel crude.

Eleven nations outside the organization, including Russia, also joined the pact by promising to extend the cuts by an additional 558,000 bpd.

In a sign of how badly oil nations were hurt by cheap crude, which plunged to multiyear low of $27, Venezuela's oil minister toured oil producing nations last year to rally support for a collective output cut. Oil revenues make up almost 95% of Venezuela's income.

Iran has traditionally sought a quota system to limit the group's production and shore up prices. But it has often found itself at odds with a Saudi policy of pumping more for market share.

Under the oil deal, which was announced late last year after months of negotiations and wrangling, Iran was allowed to produce an average of 3.8 million bpd in the first half of the year, some 90,000 bpd higher than October which was used as the baseline for the oil deal.

"With individual quotas in place, each producer has a fixed output limit and we also managed to restore our position in the organization," Zanganeh said.

The oil deal was widely observed as a major shift of policy from Saudi Arabia and a victory for Iran that firmly sought to raise crude oil output to recoup the market share it had lost under international economic sanctions.

In 2012, Iran ceded its place as the second-largest OPEC producer to Iraq due to tougher trade and financial restrictions against its nuclear program which hampered its economy and curtailed crude output and exports.

The cuts have helped oil prices remain within a $50-55 per barrel range for most of 2017.

Zanganeh said this month that Tehran will continue to comply with OPEC cuts as long as other members stick to their planned cuts, adding that "most countries want OPEC's decision to be extended."