Iran’s Agreement to raise OPEC output ceiling with reluctance

Iran’s Agreement to raise OPEC output ceiling with reluctance

Head of the Trend Persian service Dalga Khatinoglu

Twelve OPEC member countries agreed to officially fix cartel's output ceiling to 30 mbpd, a 6 million barrel increase over the ceiling they set in 2008.

According to official OPEC reports, member countries ignored quotas and increased their oil production level, which totaled 30.47 mbpd by November of 2011.

Six months ago, at a meeting of OPEC oil ministers, Iran, Venezuela and Algeria opposed Saudi Arabia's proposal to increase the OPEC's production ceiling by 1.5 mbpd.

This created a split among members and the meeting ended inconclusively.

In reality, OPEC's production ceiling unofficially reached more than 30 mbpd in November (with Saudi Arabia's sudden increase of its crude oil production to 10 .047 mbpd), excepting condensate, Libya's increase of its production ceiling again by a million bpd, and Iraq's oil export increase to 2.135 mbpd.

Saudi Arabia's oil production hasn't been more than 10 mbpd since 1980.

It is likely that Saudi Arabia intended its production ceiling increase to send the message at the start of OPEC's meeting that it can, and will, produce as much oil as needed.

Iran had no choice but to agree with increasing OPEC's production ceiling, merely making what was already being done legal.

With more than 10 mbpd of oil production, Saudi Arabia still has a surplus oil production capacity of 2 mbpd.

At an oil conference in London this fall, Prince Turki al-Faisal, the former head of Saudi Arabia's security apparatus, said his country's surplus production capacity equaled Iran's entire production, which equals to 2.5 million barrels per day.

So, if Iran was to be completely eliminated from the production cycle, Saudi Arabia's oil could become a replacement.

Turki al-Faisal made these remarks the day after Iran was accused of planning to assassinate Saudi Arabia's ambassador to Washington.

Saudi Arabia's abrupt oil production increase came just as European countries and the U.S. intensified their debate over boycotting Iran's oil, while at OPEC's Wednesday meeting Rostam Ghasemi, Iran's Oil Minister, said Saudi Arabia would never increase its production ceiling to help the West countries to ban Iranian oil.

There are two problems with Saudi Arabia's surplus production capacity to replace Iran's crude.

First, Saudi Arabia's surplus oil is super heavy, and Iran's oil exports are heavy and light oil respectively. This means refineries would have to be retrofitted to process super heavy oil, which would be a lot more expensive.

The second problem is that Saudi Arabia's surplus crude capacity is for "emergency purposes only", like in case with Libya, when the unrest situation in the country caused big drops in Libya's oil production (from 1.5 mln. To 300 000 barrels per day). Thus, this Saudi Arabian source is questionable to be used on a regular basis.

And if other oil producer faces the same problem as Libya or in case of another emergency situation, how would the shock of increase in oil prices be absorbed then?

In 2010 Iran's exports equaled $83 billion, which includes $71 billion of crude and condensates exports.

This alone shows how much Iran needs OPEC to keep the production ceiling low in order to keep world oil prices high. Over the last year, Iran had $58 billion in legal imports (which legally passed through Iranian customs). Mostafah Maturzadeh, deputy vice-president of the Iranian parliament's economic commission recently said that the volume of goods smuggled into Iran had reached a worrisome level and they accounted for nearly a third of the country's imports. According to Maturzadeh, the goods smuggled in Iran is valued at $19 billion annually.

Today, 80 percent of Iran's oil wells are in their second half-life (Iran has 40 oil fields, 13 offshore and 27 onshore). These wells face more than 8 percent drop in production (300-400 barrels annually).

Iran's oil exports account for half of its government's income and 80 percent of its total exports (including gas condensates).

Currently Iran has a little more than 2.1 million barrels of oil exports, a figure that continuously drops year by year.

The country's only hope for increasing its income from oil exports is keeping OPEC production down and world crude oil prices up.

In 2006, Iran produced more than 4.1 million barrels of oil. Today this figure has fallen to 3.55 million barrels while Iran's domestic oil consumption has grown by 18 percent.

The time will tell, which

Right now, Iran supplies about 5% of world's oil demands. The time will tell, how Iran would be ranked on International oil markets as an oil leader.

Kazakhstan’s AIX taking measures to develop local mining companies
Kazakhstan’s AIX taking measures to develop local mining companies
Istanbul Airport receives ‘Chinese Friendly Airport’ certificate
Istanbul Airport receives ‘Chinese Friendly Airport’ certificate
Canada will spend big to combat coronavirus, saying now is 'not the time for austerity'
Canada will spend big to combat coronavirus, saying now is 'not the time for austerity'
Loading Bars
Latest
Kazakhstan’s AIX taking measures to develop local mining companies
Kazakhstan to open General Consulate in Samarqand
Istanbul Airport receives ‘Chinese Friendly Airport’ certificate
US Ambassador Degnan says Georgia’s parliamentary elections should be fair, transparent, free
Zarif arrived in Moscow
Canada will spend big to combat coronavirus, saying now is 'not the time for austerity'
Chilean capital's metro in full operation after damage from social unrest
Brazil's COVID-19 death toll nears 139,000
3 policemen, 4 prisoners dead in foiled jailbreak attempt in Egypt
Saudi king stresses continuous efforts to promote global COVID-19 response
Egyptian FM heads to Jordan for quartet Arab-EU meeting on Palestinian cause
Belgium to relax face mask rules
Finland, Norway and Sweden announce wider military cooperation
Singapore to permit more people back to workplace in easing COVID-19 control measures
Money transfers from Azerbaijan to Russia down in 2Q2020
Vaezi: Legal proceedings underway to receive South Korea's debts
Turkmenistan to help Afghanistan complete railway to Tajikistan border
Exports of knitwear from Georgia to Turkey down
Kazakhstan raises chemicals import from Turkey
Mali risks 'economic paralysis' from post-coup embargo: trade group
New residents in Azerbaijan’s Balakhani Industrial Park
Georgia slightly ups import of grain, legumes from Turkey
Iran, Russia seeking to expand scientific cooperation
Italy's goods export to Kazakhstan down twofold
Anglo Asian Mining increases payments to shareholders
Uzbekistan slightly reduces imports of leather goods from Turkey
Chairman of State Duma of Federal Assembly of Russia talks Azerbaijan’s territorial integrity (PHOTO)
Get rewarded with Azercell!
Chairman of Public Organization of Udi people thanks Azerbaijan
Agricultural production up in Azerbaijan’s Nakhchivan
Iran's plan to develop paddy fields fails, farmers demand compensation
Iranian trucks carrying tomatoes stuck at Pakistani border
Saudi Arabia explores wind potential in Uzbekistan
Azerbaijan to purchase COVID-19 vaccine
Iran to develop power cooperation with Afghanistan
Iranian Energy Exchange announces products to be on sale September 26
IranAir to resume flights to Germany after several months
Volume of cargo movement through Azerbaijani ports increases
Iran discloses volume of wheat purchased in Ardabil Province
Energy Community: 2020 - remarkable year in terms of Georgia's ability to continue on its reform path
Iran to announce decisive decisions on combating COVID-19
Kazakhstan taking measures to increase railway border stations capacities
Tesla expects approval for battery cells plant in Berlin
UK Brexit border delays 'likely to worsen' in January
Georgia sees decrease in car re-exports
Import of Turkish clothes by Iran plunges
Iran’s Bahar Azadi gold coin price continues to rise
Parliament speaker: Azerbaijani people to never allow creation of second Armenian state on their territory (PHOTO)
Azerbaijan confirms 173 more COVID-19 recoveries
Oil accounts for major part of exports from Azerbaijan to Croatia, says ministry
Volume of gas consumption in Iran revealed
Austrian OMV oil company to start gas exploration in Georgia
EAEU countries increase export of dairy products to Turkmenistan
Kazakhstan’s Oil Construction Company to buy pipes via tender
All activities for Ionian Adriatic Pipeline postponed: Croatian Ministry
Turkey's clothes export to Uzbekistan slumps
Russia eyes to build nuclear power plant in Uzbekistan
Vladimir Putin: Increase of excess income tax rates is justified step
Extraction plan for Iran's South Pars gas field determined
Azerbaijan, ADB discuss prospects for expanding cooperation (PHOTO)
Iran to begin studies related to Sanandaj-Bashmakh route
Kazakhstan Railways opens tender to buy electric generators
Review of dairy products exported by Georgia to Azerbaijan
Israel's Mobileye, Dubai's Habtoor partner on self-driving cars
Georgia exports first batch of honey to Azerbaijan
Azerbaijan developing vaccination strategy against coronavirus
Auction on placement of Azerbaijani Central Bank's short-term notes held
ADB talks opportunities for financing of projects in Azerbaijan
Kazakhstan's crude oil exports to Netherlands surge in 1H2020
Turkmen company plans to cover domestic demand for viscose thread
Volume of lending in Azerbaijan’s Nakhchivan Autonomous Republic increases
Volume of maritime cargo transshipment from S.Korea via Turkey detailed
Ukrainian International Airlines FlyUIA announces flights to Georgia
Kazakhstan's passenger cars export value to Azerbaijan revealed
Turkmen company for polypropylene production thread revealed export volumes
Turkish BOTAS discloses volume of oil shipment from Ceyhan terminal
Iran declares volume of areas put into operation in agricultural parks
Revenues of Azerbaijani Nakhchivan's mobile communication operators up
Speaker of Azerbaijani Parliament: Armenian PM's statements undermine international efforts for peaceful settlement of Karabakh conflict
Georgia's import of tubes, pipes, hollow profiles from Turkey up
Turkmenistan’s Turkmennebit exceeds volume of oil production
Non-cash payments getting increasingly popular in Azerbaijan
Kazakhstan’s QAZAQ AIR resuming flights on more domestic routes
Foreign trade turnover of Azerbaijan's Nakhchivan grows
Iran imports flu vaccine as possible medicine against COVID-19
Paris Eiffel tower evacuated
World GDP spent on energy to be halved by 2050
RAEX: Structural reforms in public sector of Uzbekistan’s economy to support the economic development
AZAL launches special flights to Ankara and Antalya
Turkey remains main importer of flours, meals, pellets from Georgia
Ways for decarbonizing operations of oil & gas companies
China's import of ready-made clothing from Turkey spikes
Geostat reveals volume of ferroalloys exported by Georgia to Turkey
Construction of Ashgabat-Turkmenabat highway continues
Asian Development Bank expanding support program in Azerbaijan
Oil & gas industry to become world’s carbon waste disposal agent
Number of people infected with coronavirus (COVID-19) in Iran exceeds 430,000
Georgians traveling to Estonia to be obliged to go through 14-day self-isolation
Value of exports from Iran’s Kohgiluyeh and Boyer-Ahmad Province climbs
GDP data of Azerbaijan's Nakhchivan revealed
All news