Wall Street Journal wrote in its Sunday edition that Iran wants to double its crude-oil exports soon after sanctions are lifted and is pushing to convince fellow members of the Organization of the Petroleum Exporting Countries to renew its quota system.
Wall Street Journal columnists, Benoit Faucon and Summer Said, quoted Iran’s Deputy Oil Minister for Planning and Supervision, Mansour Moazami, as saying in an interview that should sanctions be lifted, Iran’s oil exports would reach 2.3 million barrels, compared with around 1.2 million barrels a day today.
WSJ wrote that both developments could set up a clash with Saudi Arabia, which is scrambling to raise its own export numbers and has opposed the return of production limits on individual OPEC members. They underscore how Iran’s full return to the export market would upend the status quo among big oil-producing countries as the Islamic Republic appears to be nearing a deal with six world powers that would lift sanctions in exchange for nuclear-program curbs, it added.
According to WSJ, a deadline for a deal is Tuesday. It quoted officials as saying the elements of an agreement were falling into place over the weekend, though its prospects remained uncertain.
“We are like a pilot on the runway ready to take off. This is how the whole country is right now,” Dr. Moazami said.
The Journal wrote that Iran is already in contact with former oil buyers in the European Union—traders such as Vitol Group and big oil producers such as Royal Dutch Shell PLC, Total SA and Eni SpA—and existing importers in Asia to help absorb the potential new shipments, according to the Iranian oil ministry and the companies.
It noted that Iran’s oil reserves are the fourth in the world and its production capacity stands at about four million barrels a day—making it the second-biggest producer in OPEC if its output were unrestricted. EU sanctions in 2012 banned the import of Iranian oil and prohibited most big oil companies from working with Iran, while American pressure forced Asian nations to reduce their purchases.
It added that the return of Iran’s oil would come at a sensitive time for the world’s oil markets. The price of Brent crude, the global benchmark, has fallen by more than 45% in the past year, trading at around $61 a barrel, as supply outpaces demand by about two million barrels on any given day. OPEC nations, especially Iraq and Saudi Arabia, have been pumping at record levels while American production has shown signs of resilience.
The WSJ continued that oil-market analysts have expressed skepticism that Iran could increase production as fast as it claims. A senior OPEC delegate said some rival producers doubted that Iran had the facilities to reach its previous production levels of 4.2 million barrels a day, it added.
It further quoted Moazami as saying he didn’t expect prices to fall because global economic growth would drive demand higher. He was further quoted as saying that Iran’s own forecast for oil prices was now $70 a barrel by the end of 2015.
Moazami said Iran was pushing OPEC to return to individual production allocations, also known as quotas. The organization discontinued quotas in 2011 because they caused friction and member countries didn’t respect them anyway. OPEC replaced quotas with a collective ceiling—currently at 30 million barrels a day—but even that is seen as more of a guideline than a limit these days, OPEC officials have said, as the group is currently producing more than 31 million barrels a day.
“Their mechanism right now is not proper. It has to return to its past ability and capacity,” Dr. Moazami said.
A reintroduction of quotas would need to be unanimously approved by the organization.
At its last meeting on June 5, Iran’s oil minister Bijan Zanganeh informed other OPEC ministers his country’s production would increase if sanctions are lifted and offered to reinstate the quotas. But the proposal was brushed off by his Saudi counterpart, Ali al-Naimi, who said the output boost shouldn’t be discussed until it materializes and ruled out the return of production allocations, according to Persian Gulf Arab and Iranian officials.
Without commenting on any particular country, Moazami said “my personal belief is that OPEC will accept” a resumption of individual allocations. “It will take time but this is for the benefit of OPEC,” he said.
But the senior OPEC official said the organization would return to quotas only if it “is absolutely necessary” and the recent price crash didn’t warrant such a decision.