Iran's ex-OPEC governor urges oil producers to take action against falling prices

Iran's ex-OPEC governor urges oil producers to take action against falling prices

Tehran, Iran, Dec. 19

By Milad Fashtami - Trend:

Iran's ex-OPEC governor Mohammad-Ali Khatibi believes that all major oil-producing countries need to gather and take a serious action to prevent oil prices from falling further.

Khatibi told Trend Agency on Dec. 19 that all producers are bearing losses under current circumstances.

"Some states may use their previous savings to compensate the decrease in their oil revenues, but in the long-term they can't afford such losses," he said.

Oil price has faced a sharp fall in the past few months reaching below $60, from $110 in mid-2014. According to Bloomberg, Futures fell as much as 2.4 percent after sliding below $54 a barrel on Dec. 16 for the first time since May 2009.

"If each country supports the common interest of all oil-producing countries as a whole, then the market will once again become stable," Khatibi said.

"Influential countries such as Iran, Saudi Arabia, and Russia should lead the cause," he said, adding that non-OPEC producers should also contribute.

Iranian officials have repeatedly said that OPEC's decision for not cutting oil prices was rather political.

"Some OPEC members say the organization refused to cut output because major non-OPEC states rejected the organization's request for reducing their production. But some others believe that the issue was rather political. Both the views seem to be plausible," Khatibi said, adding the only thing that really matters is finding a way to come of this crisis.

"Financial interests can soften political stances," he noted.

The Iranian diplomat predicted that the oil price's rise in the future is inevitable.

"The oil price will continue to fall only until the market's supply is more than demand, and that will not last forever," Khatibi said.

"Either the producers reach an agreement and cut their output, or the prices will fall further until production for certain producers will lose its economic justification, so we can be sure that in the future the supply and demand will be balanced and the prices will bounce back," he explained.

Iran is expected to face severe budget deficit in the current Iranian calendar year (to end March 20, 2015).

The country decided to sell its crude oil to Asia in November at the biggest discount in almost six years. The decision was made after Saudi Arabia cut prices for all grades and to all regions for November. Qatar and Iraq decreased their prices as well.

Iran's current year budget envisages the price of $100 per barrel of oil.

Based on Iran's budget law, the country is supposed to export 1.4 million barrels of oil (including gas condensate) per day.

Reports suggest that if the current tendency continues, the total budget deficit may soar above $2.5 billion.

The Iranian President Hassan Rouhani also predicted that Iran's total oil revenues will be 30 percent less than expected.

Falling global oil prices forced Iran's government to decrease the oil price figure in next year's budget to $72 per barrel.

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