Iran signals compromise for modest rise in OPEC oil output
Reuters
Published Jun 20, 2018 12:10PM ET
Iran signals compromise for modest rise in OPEC oil output
By Rania El Gamal, Shadia Nasralla and Alex Lawler
VIENNA (Reuters) - Iran signaled on Wednesday it could compromise on a small increase in OPEC oil output when the group meets this week, as Saudi Arabia scrambled to convince fellow members of the need for a larger rise in production.
The Organization of the Petroleum Exporting Countries meets on Friday to decide output policy amid calls from major consumers such as the United States and China to cool down oil prices and support the global economy by producing more crude.
Iran said on Tuesday OPEC was unlikely to reach a deal, setting the stage for a clash with kingpin Saudi Arabia and non-member Russia, which are pushing to raise production steeply from July to meet growing global demand.
But on Wednesday, Iranian Oil Minister Bijan Zanganeh said OPEC members that had overdelivered on cuts in recent months should comply with agreed quotas.
That would effectively mean a modest boost from producers such as Saudi Arabia that have been cutting more deeply than planned despite production outages in Venezuela and Libya.
"OPEC could keep the same deal with compliance going back to 100 percent," said an OPEC source who is aware of Iran's stance.
OPEC Secretary-General Mohammad Barkindo said he was confident there would be a deal when the producer group meets in Vienna on Friday.
Russia has proposed OPEC and non-OPEC producers raise output by 1.5 million barrels per day (bpd), effectively wiping out existing production cuts of 1.8 million bpd that have helped rebalance the market in the past 18 months and lifted oil (LCOc1) to $75 per barrel. Oil traded as low as $27 in 2016.
Ecuador said on Wednesday OPEC and its allies could agree to a compromise increase in oil output of around 0.5-0.6 million bpd.
A decision to increase output could be taken even with Iran refusing to sign up, as has happened before in OPEC.
For graphic on IEA estimates of non-OPEC supply growth in 2018 click https://reut.rs/2rJnnCO
ADDRESSING OVER-COMPLIANCE
Iran has so far been the main barrier to a deal, with Zanganeh saying OPEC should not yield to pressure from U.S. President Donald Trump to raise output.
He said Trump had contributed to the rise in prices by imposing sanctions on OPEC members Iran and Venezuela, which will likely lead to lower exports.
Zanganeh said he would leave Vienna on Friday even before OPEC holds talks with non-OPEC producers the next day, but efforts were underway on Wednesday to convince Iran to participate in a deal.
Sources said Saudi Arabia did not want to be seen as putting too much pressure on Iran and hence Russia was instead trying to convince Tehran.
Zanganeh was due to attend a ministerial committee on Thursday, two sources said. Iran is usually not part of the committee, which includes Russia, Saudi Arabia, the United Arab Emirates, Oman, Kuwait, Algeria and Venezuela.
Get The News You Want
Iraq and Venezuela have also opposed a relaxation of production cuts, fearing a slump in prices.
For graphic on IEA estimates of global oil demand growth click https://reut.rs/2Ik645v
Iraqi Oil Minister Jabar al-Luaibi said on Wednesday he hoped there would be agreement when OPEC meets but added: "The oil market has not reached the level of stabilization."
Gulf producers usually aligned with Saudi Arabia - the UAE, Kuwait, Oman and Bahrain - have also cautioned against a large output increase and signaled they have been rattled by Riyadh's close coordination with Russia, sources have said.
Gulf oil producers' views still differed on Wednesday on how much to increase production and whether such a move should be gradual, sources said.
They nevertheless tried to bring Iran on board for a deal, with ministers from the UAE, Kuwait and Oman meeting Zanganeh on Wednesday.
Oman's oil minister Mohammed bin Hamad Al-Rumhy said he believed Iran would agree to an output increase on Friday. He said the meeting would tackle over-compliance with oil output cuts and added that Iran was "very cooperative".
For graphic on OPEC compliance in May - Reuters Survey click https://reut.rs/2JRWnw1
For graphic on balance between global oil supply and demand click https://reut.rs/2MB4tH3
Written By: Reuters
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