OPEC: Iran Did Not Offer To Curb Crude Oil Output

OPEC: Iran Did Not Offer To Curb Crude Oil Output

Wednesday, Iran did not offer to curb its Crude Oil output as part of a global pact to freeze production to prop up prices. Thus, making very clear it wants to recapture the market share it lost during years of sanctions.

Iran’s stance complicates talks on output levels after a surprise compromise this week between the world’s top exporters, non-OPEC Russia and Saudi Arabia, to freeze output at January levels, at their historic highs.

The 1st mooted global Crude Oil pact in 15 years has failed to impress the market, which had expected a production cut instead of a freeze that could even turn into an increase if Iran wins special terms from fellow OPEC members.

“This is the first step and other steps should also be taken. This cooperation between OPEC and non-OPEC members to stabilize the market is good news. We support any effort to stabilize the market and prices,” Iranian oil minister Bijan Zanganeh said, according to the Shana news agency.

Mr. Zanganeh spent 2 hours with oil ministers from Iraq, Qatar and Venezuela in Tehran Wednesday. The visitors left the Tehran meeting without comment.

“We had a good meeting today and the report of yesterday’s meeting was given to us. We support cooperation between OPEC and non-OPEC members.

“I was told that Russia as the world’s biggest oil producer, Oman and other countries are ready to join. This is a positive step, we have a positive approach to it, this is a good start,” he said.

Iran is the Key obstacle to the 1st joint OPEC and non-OPEC deal since Y 2001, having pledged to increase output sharply to regain market share lost during sanctions.

“Asking Iran to freeze its oil production level is illogical … when Iran was under sanctions, some countries raised their output and they caused the drop in oil prices.” Iran’s OPEC envoy, Mehdi Asali, told the Shargh daily newspaper before the talks on Wednesday.

The sanctions were lifted last month after an agreement with world powers, allowing Tehran to resume selling Crude Oil freely in international markets.

Iran exported around 2.5-M BPD of Crude before Y 2012, but sanctions cut that to around 1-M BPD.

Tehran pledges to raise supply by around 1-M BPD in the next 6-12 months and Wednesday some Iranian banks were reconnected to the SWIFT global transaction network, which will allow it to facilitate banking business.

Iranian barrels will add to the global glut fueled by US Shale  Oil output and a decision by Saudi Arabia to pump at full capacity to drive higher-cost producers out of business.

The world is already producing about 1.5-M BPD more than it consumes, with stockpiles at record levels.

A freeze is not a cut, and keeping Crude Oil production at January levels implies higher-than-expected annual output, insuring continuing market oversupply and lower prices.

The production freeze is an unofficial way for Saudi Arabia to make room for the restart of the Iranian exports.

WBR Analysis for OIL: Overall Short Intermediate Long
Bearish (-0.47) Neutral (-0.23) Bearish (-0.46) Very Bearish (-0.71)
WBR Analysis for USO: Overall Short Intermediate Long
Very Bearish (-0.52) Bearish (-0.26) Very Bearish (-0.54) Very Bearish (-0.75)

Stay tuned…

Paul Ebeling

West Brook Radio

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