OPEC ISN’T WORKING
OPEC's strategy of holding output steady is not working and the group's members should discuss production levels before its next meeting in June, Iran's oil minister said, a sign of the pain lower prices are causing OPEC's less wealthy producers.
However, Bijan Zanganeh also told Reuters it was up to other members of the Organization of Petroleum Exporting Countries (OPEC) to make way for any extra Iranian crude that reaches world markets if Western sanctions on Tehran are lifted.
Oil prices have halved from $115 a barrel in June last year, in a drop that deepened after OPEC refused to cut output and defend market share. Top exporter Saudi Arabia was the driving force behind the policy.
"It seems [OPEC's strategy of not cutting output] does not work well, because prices are coming down," Zanganeh told Reuters on Thursday during a visit to Beijing. "We haven't witnessed stable situations on the market."
Iran was among the OPEC members which wanted an output cut at OPEC's last meeting, in November. But the Gulf OPEC members, who account for more than half of the group's output, refused to cut without the participation of non-OPEC producers.
Brent crude oil hit a near six-year low close to $45 in January. It was trading around $57 on Thursday, down from its 2015 high of $63.
OPEC, which pumps one third of the world's oil, may soon have to deal with an increase in supply from Iran if Western sanctions over its nuclear programme are lifted.
The group will be able to "coordinate itself" to accommodate Iran's return without causing a price crash, said Zanganeh, who was making his first visit to Beijing since taking on his current role two years ago.
But so far there is no sign of any willingness of other OPEC members to cut supply. Days after the announcement of Iran's framework nuclear deal with world powers, Saudi Arabiasaid it had increased production.
OPEC's next meeting is on June 5. Speaking in Riyadh on Thursday, an adviser to Saudi Arabia's oil minister said it was too soon to say what OPEC will do.
Kuwait, however, has said OPEC will hold its course when it meets, a view expected to be the position of the other Gulf OPEC members.
Iran, once OPEC's second-largest producer after Saudi Arabia, hopes to boost exports by as much as 1 million barrels per day (bpd) in just two months if there is a final agreement with world powers on its nuclear programme and sanctions are lifted.
The Iranian minister arrived in Beijing just a week after Tehran and the world powers reached the framework nuclear deal to discuss oil sales and Chinese investments in Iran.
Higher sales to China, Iran's biggest oil client and trade partner, would likely be on the cards with an end to sanctions. Iran also hopes to resolve differences with Chinese energy companies on oil and gas projects in the Islamic republic, so that production can be ramped up again quickly.
Iran's oil exports have been cut to around 1.1 million bpd from at least 2.2 million bpd before 2012 and the loss of oil income has made it difficult to invest and pay for the equipment and services needed to keep its production operating smoothly.
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