Rising Iran oil export to push Saudi output down
Baku, Azerbaijan, June 17
By Umid Niayesh - Trend:
A former top Iranian oil official believes that resuming Iran's oil export to pre-sanctions level would make Saudi Arabia to have to decrease crude output.
Fereydoun Barkeshli, the former general manager of National Iranian Oil Company (NIOC) in OPEC and International Affairs told Trend on June 17 that "there is no doubt that Saudi Arabia will have to cut back production".
Before the western sanctions on Iran in mid-2012, the country was exporting 2.5 million barrel per day (mb/d) of oil, but the figure has fallen to 1.2 mb/d in 2014 and 1.4 mb/d in May 2015.
Iran and P5+1(the US, UK, France, Russia, China and Germany) are negotiating to reach a comprehensive nuclear deal by June 30 to pave the ways for elimination of sanctions imposed on Iran.
Iran's Oil Minister Bijan Namdar Zanganeh has already said that the country can pump more, 0.5 mb/d of oil to markets a month after lifting the sanctions and this volume can reach 1 mb/d in six months.
Barkeshli, who is currently a private energy consultant and president of Vienna Energy Research Group said "as such Saudi Arabia will be required to reduce crude production to open space for Iran."
Reuters published a report on June 15, quoting several sources as saying that Iran has stored 38 million to 45 million barrels of oil at sea to be exported as soon as the sanctions on Iran are eliminated.
"In fact most oil producing countries keep some stocks often floating when there glut in the market," Barkeshli said. "This is an incentive for the buyers who find themselves better situated to have their requirements."
"This is the case with Saudi Arabia and other major producers," he said. "Back in 1980's when prices fell bellow $10 per barrel, Iran and several other oil producers hired floating and non-floating storage in the Sidi Kerir port in order to enhance their advantage of reaching the market quickly. However, I am not sure about 40 million barrels of floating crude. It is more than the volume that countries keep as a marketing strategy. In case of Iran it could be some unsold cargoes though I am not sure".
Iranian former official added that "having said that even 40 Million barrels is not such a big volume that affect prices." "As for Iran's return to the international market, there is no doubt that Saudi Arabia will have to cut back production," he said. "When Iran had to cut down crude oil production due to international oil embargo, Saudi Arabia raised production and filled the gap by over 90 per cent of Iran's cut back".
Saudi Arabia has traditionally played the role of swing producer in OPEC though it officially declined to be called a swing producer back in 1986, it continued to play that role frequently, the Iranian expert believes.
Barkeshli says that in fact Saudi might be willing to cooperate so that to provide some breathing space for its own oil fields which are already under pressure due to excessive production.
"On the other hand lower oil prices have already let to lower crude production in some conventional as well as shale oil and other non-conventional crude oil which provide room for return gradual return of Iran to the world market," he said. "Nevertheless, Iran has ambitious capacity build programs that will boost production close to pre-revolution levels".
Saudi Arabia produced 10.107 mb/d in May, 421 km/d more than 2014 average, according to the latest monthly report, released by OPEC.
Iran's oil output also reached 2.845 mb/d, 79 km/d more than 2014's production in average.