Iran backs moves to stabilise oil market, raise prices

Iran's Oil Minister Bijan Zanganeh in a November 2015 file photo.
Iran's Oil Minister Bijan Zanganeh in a November 2015 file photo.PHOTO: REUTERS

TEHERAN (AFP) - Iran said Wednesday it supported moves by Saudi Arabia and Russia to stabilise the oil market and raise prices but stopped short of committing itself to any production curbs.

Oil Minister Bijan Zanganeh’s comments came after he met his Iraqi, Venezuelan and Qatari counterparts in Teheran, a day after major producers led by Riyadh agreed to freeze output to tackle a global supply glut.

Qatar currently holds the revolving chairmanship of the Opec oil cartel.

Iran has long said it must pump more oil – despite plunging prices – as it seeks to regain market share lost during the era of sanctions imposed over its nuclear programme.

A US- and European-imposed embargo flattened Iran’s foreign sales but Teheran, which has the world’s second-largest crude reserves, has ramped up production since sanctions were lifted last month upon implementation of a deal with world powers to limit its nuclear activities.

Opec kingpin Saudi Arabia and Russia, which is not a cartel member, said their agreement on Tuesday to freeze output at January levels was conditional on other major producers, such as Iran, doing the same.

Zanganeh welcomed their move but signalled it alone was not enough to resolve the problem of low prices for producers.

“This is a first step but we need others. We look forward to the start of cooperation between Opec and non-Opec countries,” he was quoted as saying by the oil ministry’s news service, Shana.

“We support any measure that can stabilise the market and increase prices.”

 

At around 1630 GMT Brent North Sea crude for April delivery was up US$2.08 at US$34.26 and West Texas Intermediate for March delivery was up US$1.56 at US$30.60.

European stock market also made strong gains on the emerging agreement to shore up prices.

Before Wednesday’s talks Mehdi Asali, Iran’s director general of Opec affairs at the oil ministry, blamed other producers for creating a glut and signalled Teheran would not change course on production.

“As these countries produced more than their quota and more than the Opec official ceiling of 30 million barrels, which they had agreed on, the price collapsed and so now the responsibility to bring back balance to the oil market is mainly on these countries,” he told Iran’s Shargh newspaper.

“Iran’s output compared to then (before sanctions) is 1.5 million barrels per day less and it’s illogical to ask Iran to further reduce its production.” Experts reacted warily to Zanganeh’s latest remarks.

“There is no clear message from Iran on how they intend to support this freeze,” said Abhishek Deshpande, lead oil market analyst at Natixis in London.

“It seems it’s a play on words. They are keeping the markets calm by saying ‘we support oil price stability as discussed in Doha’ but in reality they have said nothing when it comes to freezing their future production.”

Saudi Oil Minister Ali al-Naimi said the agreement with Russia was designed to stabilise the market following the dramatic price fall since mid-2014.

Venezuela, Qatar and Kuwait also signed on to the planned freeze following Tuesday’s closed-door meeting in Doha.

The announcement marked the first move between Opec and non-cartel producers to stem the price fall since the slide began.

Saudi Arabia and other Opec producers have been refusing to reduce output in an attempt to drive less competitive players, in particular US shale oil producers, out of the market.

Russia has seen its recession-hit economy damaged by the slump and Saudi Arabia has announced a record budget deficit.

But Iran has suffered even heavier losses because the sanctions closed its access to much of the world market.

Iran had been producing around 2.8 million barrels per day, around one million of which were exported, but after the nuclear deal it announced an immediate hike of 500,000 bpd. A further 500,000 bpd are planned to be added by the end of 2016.

Despite its push to ramp up production, Iran has been moving away from an oil-dependent economy. The coming year’s budget, starting on March 20, will be only 25 per cent reliant on oil revenues following moves to increase general taxation.