Oil may dip to $40, warns Iran - THE NATION
A fractured Organisation of Petroleum Exporting Countries (OPEC) is meeting later this week to discuss a deal to cut oil production-yet again-to rebalance the market and lift oil prices that have recently slipped to below most of the cartel members’ budget-balance points.
OPEC needs a unanimous vote to pass decisions such as curtailing production. Yet, Iran-one of OPEC’s biggest producers but also one of the most sidelined members in recent months-warns that the group is unlikely to reach an agreement on a sizeable cut of around 1.4 million bpd as some are suggesting. Such a failure to act decisively would send oil prices plunging to $40 a barrel, Iran’s OPEC Governor Hossein Kazempour Ardebili told Bloomberg in an interview.
The cartel and its Russia-led non-OPEC allies may not extend their cooperation pact either, according to Iran’s representative at OPEC-a position typically held by the second most powerful oilman in a cartel member after the oil minister.
Iran has repeatedly expressed frustration with the Saudi/Russia-led increase in oil production since June to offset what was expected to be a steep decline in Iranian oil supply with the United States (U.S.) sanctions on Tehran’s petroleum and shipping industries.
Iran’s oil exports indeed dropped by some 1 million bpd, but they are likely still holding onto above 1 million bpd, while U.S. waivers to eight Iranian customers allow buyers to continue purchasing oil at reduced volumes until the end of April next year.
Oil prices have plunged by around 30 per cent from early October as the market started to fear an oversupply is building up again, due to record high production in Saudi Arabia and Russia, and an all-time high oil output in the United States, coupled with fears of slowing economic and oil demand growth.
“I doubt, with the failure they had in the last three months, that the declaration of cooperation gets extended,” Kazempour told Bloomberg, referring to the Saudi-Russia alliance.
“Why institutionalize a failure? And it needs unanimity to be extended,” he noted.
Iran, for one, will not take part in any cuts while there are U.S. sanctions on its oil, Kazempour said, adding that those who increased production should be the ones to cut, that is the Saudis and Russians and few Arab Gulf states like the United Arab Emirates (UAE) and Kuwait.
“Now they are asking others to share in the cut. Whoever increased, they should cut,” Kazempour told Reuters.
“The pilot and co-pilot crashed the plane and all 25 passengers are now in critical condition,” said Iran’s OPEC governor.
The ‘pilot and co-pilot’, however, agreed this weekend to extend the deal, Russia’s President Vladimir Putin said, although he admitted there isn’t an agreement on specific cuts, yet.