Abu Dhabi, UAESaturday 19 October 2019

Iran backs Opec cut extension but with misgivings

Oil surged to the highest level in five weeks as producers convene in Vienna for the alliance's summer meeting

Iraq, Opec’s second-biggest producer, has also vowed to commit to production cuts, even as it looks to raise overall capacity to 5 million bpd by 2030. Bloomberg
Iraq, Opec’s second-biggest producer, has also vowed to commit to production cuts, even as it looks to raise overall capacity to 5 million bpd by 2030. Bloomberg

Iran is on board with an output cut extension by Opec and its allies for the second half of the year, according to its petroleum minister, despite denouncing what he termed as “unilateralism” at the alliance.

Bijan Zanganeh said Iran would give its approval to an extension regardless of whether it was for six months or nine.

“Our position is very clear. I have no difficulty with the extension of the cut or more cuts but my problem is with unilateralism. I have no difficulty, I don’t want to block the cut,” Mr Zanganeh said in Vienna.

The Opec+, as the alliance led by Saudi Arabia and Russia is known, is in the Austrian capital for a summer meeting.

“It’s not only my mission, it’s a matter of Opec as well because this unilateralism threatens Opec as a whole, not only Iran. It’s against the existence of Opec, the solidarity and unity of Opec,” he added.

Saudi Arabia and Russia sealed the deal on the extension of cuts on the sidelines of the G20 meeting in Osaka on Saturday. Saudi Crown Prince Mohammed bin Salman, as well as Russian President Vladimir Putin, agreed to continue the curbs starting this month, with the possibility of carrying the deal into 2020, if needed.

Russian Energy Minister Alexander Novak after the meeting on Monday, said: “Everyone supported the proposition to extend for nine months the limits agreed in December,” AFP reported.

Mr Zanganeh’s comments appeared to be directed against the two nations, although he said Iran had no trouble working with Saudi Arabia.

Oil prices surged upward in anticipation of a rollover of production cuts by Opec+.

Brent gained 2.81 per cent and was trading at $66.56 per barrel at 11.22am UAE time.

The alliance has been responsible for removing around 1.2 million barrels per day of supply from the markets since January. However, growth in US production, as well as low demand, have caused stock levels to build up.

Iran, one of Opec’s founding members, has had its oil exports curtailed under the US sanctions. The country’s output has declined by more than a million barrels per day since 2018, when the US reimposed sanctions and asked buyers to roll back Iranian imports. The country exported close to 100,000 bpd in May following the cancellation of US waivers to its crude buyers, as the White House looked to squeeze Iran’s exports to zero.

When asked if Iran was still selling its crude in the markets, Mr Zanganeh replied “officially nothing”.

Tehran has been selling its barrels covertly. China is its biggest client, which is embroiled in a trade war with the US and continues to make purchases in defiance of the White House.

He said he did not foresee the institutionalisation of the co-operation between Opec and non-Opec members at the forthcoming meeting as it was “not the time”.

Tehran does not intend to leave the group of which it is a founding member, said Mr Zanganeh. Though he added, the institution “was dying”.

Updated: July 1, 2019 08:51 PM