Iran, which faces sanctions on crude exports, sees no need for OPEC to hold an emergency meeting, a sign that markets may need to wait a month before the world’s biggest producer group responds to falling prices.
Oil Minister Bijan Namdar Zanganeh has consulted with Iranian President Hassan Rouhani about political and economic reasons for the collapse in prices, the ministry’s news website Shana reported today. No emergency meeting of the Organization of Petroleum Exporting Countries is necessary to discuss the price slide, Shana said. Rouhani told Zanganeh to use the “oil diplomacy tool” to try to prevent a further decrease, the state-run Mehr news agency said yesterday, without elaborating.
“They have their wings clipped a bit at the moment because they can’t really produce any more than they do,” Ole Hansen, head of commodity strategy at Saxo Bank A/S, said in an interview in Dubai today. “It’s difficult for them to call for any strict action when they know that when sanctions are lifted, they’re the ones that are going to ramp up production.”
OPEC, supplier of about 40 percent of the world’s oil, is scheduled to meet on Nov. 27 in Vienna to assess production and market conditions. Brent crude, a global benchmark, has tumbled more than more than 23 percent since June and was trading near $86 a barrel today in London. The decline has prompted speculation that OPEC may decide to cut production to eliminate surplus supply and led Venezuela to call for the group to convene earlier in an emergency session.
Iran, with Venezuela, was for years a vocal advocate for reducing OPEC’s collective output as a response to falling prices. The Persian Gulf producer isn’t concerned about the latest decrease, Roknoddin Javadi, deputy oil minister and managing director of the National Iranian Oil Co., told the Mehr agency in an Oct. 14 report.
International sanctions imposed on Iran over its nuclear program are choking crude exports, the nation’s main source of income. The government in Tehran is negotiating with the U.S. and five other world powers for an agreement that would lift the curbs and revive its economy. The countries have set themselves a Nov. 24 deadline for a final agreement, three days before OPEC meets.
“Iran is constrained by sanctions,” Mehdi Varzi, a former Iranian diplomat and director of Varzi Energy Ltd., an energy-consulting company, said by telephone Oct. 16. “They may have made the calculation that if a nuclear deal can be struck, they will be permitted to increase their exports, so why talk about an OPEC cut right now?”
The International Energy Agency, an adviser to advanced industrialized countries, projects that demand for crude this year crude will grow by the least since 2009. OPEC boosted production to a 13-month high in September, pumping 30.66 million barrels a day, the IEA said Oct. 14.
Saudi Arabia, the world’s biggest exporter, has “appeared determined to defend its market share” in Asia, even at the expense of lower prices, the IEA said. Kuwait’s oil minister said Oct. 12 there may be “no room” to restore prices by trimming supply.-Bloomberg