Iran has vowed to gradually increase its oil production this year by about half a million barrels a day, taking advantage of export opportunities now that global sanctions on its petroleum sector have been eased as part of the accord limiting its nuclear program.
Iran hosted ministers from Venezuela, Iraq and Qatar to review production levels one day after Saudi Arabia and Russian Federation said they’d freeze production to January levels if others followed suit.
Mehdi Asali, the OPEC envoy for Iran said that asking the country to freeze its production levels of oil was illogical, when the country was under sanctions, certain countries raised output and caused oil prices to drop.
“The proposal made yesterday in Doha for OPEC members and other countries to freeze oil production was made to stabilize the market and to improve the situation with oil prices in the interests not only of consumers but also producers of hydrocarbons”, he said.
Iran, which is returning to OPEC after a long absence, Footprint to Africa learnt, exported its first crude oil consignment to Europe on Sunday.
Analysts say Venezuela is getting dangerously close to just breaking even on the oil it produces, which accounts for 95 percent of export earnings. While the news seems like a positive step toward lifting the price for crude oil, Iran remains a key obstacle to ensuring that production levels are brought in line with global demand. The energy commodity has declined 70 percent since the summer of 2014.
But after falling to 2003 lows beneath $30 last week, crude has been rising, surging 12 percent on Friday alone after the United Arab Emirates said OPEC was ready to cooperate on an output cut. “But I think everybody agrees that we have to monitor the market situation and reaction and to consult on the next steps if necessary”, he said. In four trading sessions since hitting an almost 13-year low, oil has now gained 15.5%.
Iran’s crude output is now in the region of 3 million barrels per day.
U.S. crude stockpiles are forecast to have increased by 3.5 million barrels last week, according to a Bloomberg survey before government data on Thursday.
Iran’s stance will complicate talks on output levels after a surprise compromise this week between two of the world’s top exporters – non-OPEC Russia and the group’s leader Saudi Arabia – to freeze output at January levels, near their historic highs.
It appears the move by Saudi Arabia and its allies to freeze oil price is a strategy to protect market share, not to stop the fall in oil price.