SAUDI ARABIA - IRAN RESOLUTION
PLATTS - Iran has again rejected Saudi Arabia's declaration that OPEC and its allies are no longer bound by individual country quotas, setting up another potentially tense confrontation at the producer group's headquarters Wednesday.
"The remarks made by the Saudi energy minister are not based on an OPEC approval and are just his personal view," Iran's OPEC governor Hossein Kazempour Ardebili said, according to the country's semi-official Fars News Agency.
S&P Global Platts reported Friday that Saudi energy minister Khalid al-Falih has told other ministers the Joint Ministerial Monitoring Committee overseeing the OPEC/non-OPEC production accord, which he chairs, would no longer track individual compliance with quotas, as the deal has morphed into a collective output ceiling.
"The shift from reporting individual country conformity to reporting overall conformity will be adopted to reflect the June 23 decision of the 4th OPEC and non-OPEC Ministerial Meeting that countries will strive to adhere to the overall conformity level, voluntarily adjusted to 100%, as of July 2018," Saudi energy minister Khalid al-Falih wrote to his counterparts Thursday in a letter.
Kazempour, however, reiterated Iran's stance that OPEC "members do not have such a resolution" that approved such a change to the deal, Fars reported.
"Any increase in production more than the quotas is a violation of the current agreement as long as it is not approved by the OPEC conference," he said.
Kazempour is expected to attend a meeting Wednesday of the technical committee that advises the JMMC to voice Iran's views, according to sources who spoke to Platts on condition of anonymity.
While Iran does not sit on the JMMC, officials have said other members of the 25-country OPEC/non-OPEC coalition are welcome to attend meetings.
With US President Donald Trump pressuring Saudi Arabia to pump more so that prices moderate, OPEC agreed June 23 in Vienna with Russia and nine other allies on a 1 million b/d output boost to head off expected supply disruptions from US sanctions on Iran and Venezuela's economic crisis.
But the coalition has left unsettled how the extra barrels would be divvied up, with Saudi Arabia maintaining that countries with the capacity to pump more -- primarily itself and its Gulf allies -- would take on the production increase.
Iranian officials have said that OPEC unity is at stake.
Iran's oil minister Bijan Zanganeh walked out of a JMMC meeting in Vienna on June 21 as the deal was being hashed out, saying that Falih and others were negotiating in bad faith.
Though Iran eventually agreed to the deal, Zanganeh insisted that the terms merely returned members to their original quotas, allowing countries that had over-complied with supply cuts in place since January 2017 to produce at their allocation and nothing more. That would make the 1 million b/d increase on paper closer to 400,000 to 500,000 b/d in the physical market, given many members' inability to actually boost output.
Iran faces the prospect of significant losses to its crude oil exports later this year as US sanctions go into force, and as such, lacks any practical capability to prevent Saudi Arabia or any other member from pumping above its quota.
But Iran is likely to be backed by Venezuela, which sits on the JMMC and was likewise opposed to any deal that would allow members to exceed their quotas and infringe on others' market share.
Saudi Arabia has already busted its cap, telling OPEC that it produced 10.49 million b/d in June, far above its quota of 10.06 million b/d, according to the producer group's monthly oil market report released Wednesday.
OPEC as a whole produced 31.99 million b/d in June, according to the latest S&P Global Platts survey of OPEC officials, analysts and industry sources, still more than 700,000 b/d below its ceiling when every country's quota is added up.
Besides Saudi Arabia and Venezuela, the JMMC is composed of Russia, Kuwait, Algeria and Oman.
Representatives from the UAE, whose energy minister Suhail al-Mazrouei holds the rotating OPEC presidency for 2018 and is a close ally of Falih, will also attend Wednesday's technical committee meeting.
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