Oil: Iran effects on OPEC deal

6 years ago - Published in Commodities

Extending the OPEC cuts beyond their current expiry date at the end of 2018 would seem unnecessary if oil prices keep rising, Iran’s Oil Minister Bijan Zangeneh told the Iranian oil ministry’s news service Shana on Monday.

“High oil prices, even in the mid-term, would destabilize the prices and put pressure on them against OPEC’s interests,” the official outlet of the Iranian oil ministry quoted Zangeneh as saying.

When asked about Iran’s position regarding an extension of the OPEC production cuts beyond 2018, Zangeneh told Shana:

“No decision will be made regarding this issue in the upcoming OPEC meeting because the matter is unlikely to be included in the meeting’s agenda.”

Oil has surged more than 7 percent this month on concern geopolitical risk in the energy-rich Middle East is intensifying, with Trump set to decide whether to extend Iran’s sanctions relief on May 12. While the Organization of Petroleum Exporting Countries and its allies concluded that they have all but wiped out a global crude surplus, fears remain that U.S. drillers may continue boosting output to record levels and offset the group’s effort to balance the market.

“Concerns that the U.S. may reimpose Iran sanctions and supplies from the country may be disrupted eased,” Takayuki Nogami, chief economist at state-backed Japan Oil, Gas & Metals National Corp., said by phone from Tokyo. Still, “uncertainty about Iran will likely remain until the final moment on May 12.”

Iran’s oil exports would drop as much as 500,000 barrels a day this year and 700,000 barrels a day in 2019 if the U.S. revives sanctions, according to Fereidun Fesharaki, chairman of energy consultant FGE. When reimposed, U.S. sanctions will require buyers of Iranian crude to cut purchases within 180 days, he said. Iran produced about 3.81 million barrels day in March, according to data compiled by Bloomberg.

Meanwhile, the American Petroleum Institute was said to report U.S. crude inventories increased by 1.1 million barrels last week. That comes against forecasts for a 2.2 million barrels decline, according to a Bloomberg survey before government data due Wednesday. In the Permian basin, output is forecast to reach 3.18 million barrels a day in May, the highest since the Energy Information Administration began compiling records in 2007.