The Organization of the Petroleum Exporting Countries – whose 12 members including Iran pump one third of global oil – is mindful that Iranian oil could worsen a global supply glut and depress oil prices further.
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Oil prices recently dropped to their lowest levels in months on the back of concerns over the global oversupply.
The US Energy Information Administration released data late Friday afternoon showing that the country’s oil production hit a 44-year high of almost 9.7 million barrels a day in March and has declined to 9.5 million barrels in the two months since. After the removal of sanctions, following the UN Security Council that unanimously approves Iran nuclear agreement, crude production is expected to rise to full capacity of 3.5mb/d by the end of 2016. “But their economy is growing”, said the OPEC head. Apart from a handful of OPEC states, including Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates, no member of the cartel is positioned fiscally to withstand a long bout of low prices.
Secretary-General Abdullah al-Badri, on a visit to Moscow on Thursday, dampened the prospect of output cuts and said the market could absorb extra oil from Iran.
Iraqi production dropped 194,000 barrels a day to 4.194 million this month, according to the survey.
Those tensions do not appear to have significantly curbed actual export volumes, although a sabotage attack on the pipeline carrying crude to Turkey from Iraq earlier this week halted pumping, highlighting the potential for disruption.
“Despite the fact we got a surprise draw in the US crude inventories on Wednesday, the market remains quite anxious… that there is an oversupply situation in the crude market globally”, he said. He went on to say that OPEC welcomes the lifting of sanctions against Iran.
The only significant decline in output occurred in Libya, where supply remained disrupted by unrest and negotiations to reopen closed oil facilities had yet to succeed. Strength in the U.S. dollar in the wake of upbeat U.S. GDP data, however, kept a cap on any gains for dollar-denominated oil prices.
It also said inflation was below target, but put much of that down to falling energy prices and cheaper imports caused by the strong dollar.
In his turn, the Russian Minister of Energy replied that the oil market is now influenced by multiple geopolitical factors.
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“I don’t know what OPEC means by a stable oil price but my guess is that approximately $65 for Brent anWTId $60 for WTI is about right to promote its objectives of regaining market share, getting some relief from negative cash flow and, at the same time, keeping prices below the threshold for expensive competition from deep water oil, oil sands and all but the best tight oil production”, said Berman. Prices are down 17 per cent for the month.
