Iran Sees Better OPEC Climate as Rivals Accept Its Rising Output

  • Oil market healthy, can absorb Iran oil boost, Zanganeh says
  • Iran soon to announce progress on deals with energy companies

OPEC Fails to Agree on Output Target, What's Next?

Relations among OPEC members have improved significantly after several acrimonious meetings as the oil-producing group accepts Iran’s revival of crude output, the Iranian oil minister said.

“We had a meeting without any tension and because of the new atmosphere in OPEC we could reach some agreements like about the appointment of the new secretary-general,” Bijan Namdar Zanganeh said in an interview in Vienna on Friday, a day after the Organization of Petroleum Exporting Countries met there.

Bijan Namdar Zanganeh in Vienna.

Photographer: Akos Stiller/Bloomberg

The upbeat comments -- together with similar statements by Saudi Arabia -- suggest that OPEC is moving beyond a dark period in which its two most important members clashed repeatedly, contributing to lower oil prices. The group agreed Thursday to name Mohammed Barkindo of Nigeria their new chief. They also decided to stick to a policy of unfettered production, with ministers united in their optimism that global oil markets are improving.

Differences Remain

“We should work with each other, we are neighbors, we are counterparts in OPEC,” Zanganeh said, referring to Saudi Arabia and other Gulf Arab states. Still, big differences remain, with Iran insisting that OPEC should return to individual country production quotas, and Saudi Arabia favoring an overall output ceiling, which was scrapped in December.

Since international sanctions were eased in January, Iran has lifted oil production to a four-year high of 3.8 million barrels a day and aims for 4 million barrels a day by the end of the year, Zanganeh said. The International Energy Agency estimates Iran produced 3.6 million barrels a day in April.

“I think all accepted the reality of the market and accepted the return of Iran to the market,” Zanganeh said. In April, Saudi Arabia refused to join a pact to freeze oil production to curb a global glut, without the participation of Iran. Determined to regain its pre-sanctions market share, Iran has refused to cut or freeze its output.

Market Share

Iran produced about 4.1 million barrels a day a decade ago before a combination of international sanctions targeting its nuclear program, a lack of investment and aging fields curbed its output and exports. Since then, other producers including Saudi Arabia and Iraq have boosted their market share.

Zanganeh said that a healthy energy market has absorbed Iran’s rising production. Iran is planning to boost output to 4.8 million barrels a day within five years and rising global demand can easily absorb the extra supply, he said.

Iran will “very soon” announce progress with European and Asian oil companies seeking to sign new oil contracts to develop the country’s massive hydrocarbon reserves. In Vienna this week, Zanganeh met with representatives of companies including Total SA, Lukoil PJSC and Eni SpA.

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