Iran To OPEC: No Oil Output Pact Yet

Iran said on Wednesday it would not commit to any oil-production action with fellow OPEC members when the group meets this week despite being close to pre-sanctions output and export levels.

Tehran has been the main stumbling block for the Organization of the Petroleum Exporting Countries to agree on output policy over the past year as the country boosted supplies despite calls from other members for a production freeze.

OPEC’s de facto leader, Saudi Arabia, refused to make exemptions for the Islamic Republic, which argued it should be allowed to raise production to levels seen before the imposition of now-ended Western sanctions over Iran’s nuclear program.

“Iran supports OPEC’s efforts to bring stability to the market with fair and logical prices, but it will not commit to any output freeze,” Iran’s representative to OPEC, Mehdi Asali, was quoted as saying by Iranian oil ministry news agency SHANA.

“The issue of output rationing can be discussed after the market stabilises,” Asali said.

At its previous meeting in December 2015, OPEC failed to set any production policy including a formal output ceiling, effectively allowing its 13 members to pump at will in an already oversupplied market.

As a result, prices crashed to $27 per barrel in January, their lowest in over a decade, but have since recovered to around $50 due to global supply outages.

Those include declining production from U.S. shale producers badly hit by low prices but also forest fires in Canada, militant attacks on pipelines in OPEC member Nigeria and declining output in Venezuela, also a member of the group.

MISSING BARRELS

On Wednesday, Venezuelan energy minister Eulogio Del Pino warned that supply outages have propped up prices in recent months but the global oil glut might build up again when missing barrels return.

“More than 3 million barrels are out of the market. When those circumstances are removed from the market, what’s going to happen?” Del Pino told reporters in Vienna ahead of Thursday’s OPEC meeting.

Del Pino was a key architect of a proposal to freeze oil output earlier this year, but the plan fell apart in April after Saudi Arabia said it would take part only if rival Iran also participated.

“If you see the decline in the non-OPEC and all the situation that happened in several countries, production has been maintained the same in the last three or four months,” Del Pino said.

“So de facto we have freeze conditions,” he said.

OPEC and non-OPEC producers including Russia had traveled to the Qatari capital of Doha to rubberstump the deal, which was previously supported by Saudi Arabia’s then-minister for oil, Ali al-Naimi.

Since then Riyadh has changed ministers, appointing Khalid al-Falih as the head of a new, enlarged energy ministry.

Falih was the first OPEC minister to arrive in Vienna this week, signaling he is taking the organization seriously despite fears among fellow members that Riyadh is no longer keen to have OPEC as an output-setting organization.

So far, Falih and Saudi Gulf allies Kuwait, Qatar and the United Arab Emirates have said little about the meeting on Thursday.

Kuwait’s acting oil minister Anas al-Saleh said on Tuesday he was keen on maintaining dialogue between OPEC and non-OPEC members to help achieve balance in the market.

He also said he hoped OPEC members could agree on a new candidate for secretary-general of the organization.

Reuters

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell