OPEC must adapt to Iran ’s surplus output

OPEC must adapt to Iran ’s surplus output

Baku, Azerbaijan, Aug. 25

By Umid Niayesh - Trend:
Once Iran starts to supply the market with its surplus crude output, OPEC will be forced to adapt itself to protect the price, Parviz Mina, who served as a member of OPEC Long-Term Strategy Committee, told Trend August 25.

Iran which has signed a historic deal with the P5+1(the US, UK, China, Russia, France and Germany) last month is prepared to increase its crude export following removal of sanctions and insists that the Organization of the Petroleum Exporting Countries (OPEC) should open space for its output.

Meanwhile the organization has resisted so far decreasing output despite drooping prices, and Iran has accused some Gulf States of following political objectives through keeping the oil price down.

However, Mina predicts that when Iran starts increasing its output, the OPEC countries will eventually come to their senses and will take new action to cut production in order to protect prices from falling further than what it is today.

He further said that OPEC is still the only organization that can play an effective role in the global crude market.

OPEC actually is the only commodity organization which its leaders-the oil ministers and even the head of the states- regularly meet and its secretariat in Vienna continuously carries out research and analysis of the market and the political situation, in order to make decisions regarding the supplying of demand, Mina underlined.

"So I don't really see that the OPEC is going to lose its position in the world, but it is now facing a situation which is very critical," the expert said, adding if Iran, which so far has been under sanctions, enters into the market, this will naturally affect oil prices.

The Islamic Republic can within the next one year increase its production by some 500,000 to one million barrel per day (mbd) and with a surplus supply which exists in the market today, this additional oil will put new pressure on prices, he explained.

"According to the IEA, the demand for OPEC oil will not be more than 30.1 mbd in 2016, therefore if OPEC keeps its production at the present level of 32 mbd and Iran adds to it, then we will see a new tendency towards reduction of prices."

A look back to reasons behind oil price fall

The expert further touched upon the current situation of the oil market, saying today the global oil market is really characterized by a standoff between OPEC and non-OPEC producers amid excess supply.

"The oil prices in 2014 collapsed because of the fact that there was an imbalance in the oil market principally due to excess supply and the price of oil dropped very sharply as a result."

The reason for this is that the price of more than $100/b since the late 2000 encouraged major investments in the high cost areas and the application of new technology around the world (including US shale production, offshore West Africa, deep waters offshore in Brazil and in onshore and offshore areas in East Africa), he said.

"Another important but often and recognized reason for this surplus oil, is actually the improved performance of many older producing oilfields around the world due to the application of a new technology which is called the enhanced oil recovery (EOR). EOR has actually stopped the decline of production in many major oil producing areas," Mina underlined.

In November 2014, Saudi Arabia actually conducted its fellow OPEC members towards a decision to maintain its 30 mbd production ceiling even as oil prices were haltering down and calls were growing for a reduction in the group's production. This is while OPEC output had already surpassed the ceiling to 32 mbd.

The former OPEC consultant explained that the cartel's top producer Saudi Arabia had the idea that there was no sense for low cost producers like OPEC countries to step back and reduce their production and allow the higher cost producers outside OPEC to benefit from the reduction in the OPEC production.

Since that November decision the ceiling of OPEC has not been maintained at even 30 mbd practically, he said.

"They have already increased their output by two mbd and all countries within OPEC, excepting Saudi Arabia and Iran, have been producing at maximum capacity."

Now OPEC is faced with a decision either to reduce production to maintain prices at a reasonable level or allow the market to eventually decide on that, Mina said. The expert forecasted that the market, which is really deciding the prices at the moment, would reach a point where the reduction in non-OPEC supply will be inevitable.

"Due to the lower oil prices, the high cost production areas (such as shale oil) will reach a level that will not be able to tolerate the decline and go any lower and from that point the price has to be decided by OPEC by balancing its production."

Edited by CN

Follow the author on Twitter: @UmidNiayesh

Police fire tear gas at Paris protest against police violence
Police fire tear gas at Paris protest against police violence
Cargo, passenger traffic via Turkish Sabiha Gokcen Airport slumps amid pandemic
Cargo, passenger traffic via Turkish Sabiha Gokcen Airport slumps amid pandemic
Cargo transportation at Turkish Antalya airport reduces
Cargo transportation at Turkish Antalya airport reduces
Loading Bars
Latest
Microsoft Azerbaijan to support all initiatives in liberated territories of Azerbaijan
Azerbaijan shows footage of Kalbajar's Vang village (VIDEO)
Police fire tear gas at Paris protest against police violence
Electricity imports growing in Georgia
Cargo, passenger traffic via Turkish Sabiha Gokcen Airport slumps amid pandemic
Uzbek-Korean JSC Uz-Dong Won Co. announces tender for steel pipes supply
Cargo transportation at Turkish Antalya airport reduces
Austria records nearly 1,000 COVID-19 deaths over past 10 days
State Employment Agency of Azerbaijan opens tender on supporting start-up projects
Details of Iran’s exports to Iraq declared
Azerbaijan reports 4,212 new COVID-19 cases, 1,760 recoveries
Four citizens dead as result of mine exploding in Fuzuli - Azerbaijani Prosecutor General's Office
Kazakhstan's export volumes to China surge despite COVID-19
Assistant to Azerbaijan's president, diplomats, Garabagh FC representatives visit Aghdam Mosque (PHOTO)
Turkmenistan committed to promoting socio-economic development of Afghanistan
Georgian oil companies seek to avoid price increases
Tender for maintenance of elevators, escalators launched in Turkey
Azerbaijan's ten-month output of oil products declines
Turkey's export of grain and legumes to Turkmenistan up
Turkmenistan, Belarus discuss program of cooperation
Iran reveals its COVID-19 data for November 28
Azerbaijani president's assistant, diplomatic corps reps arrive at liberated Aghdam city
Rural digitalization project successfully underway in Kazakhstan
Missile fired to Tartar by Armenia delivered to local museum - president's assistant (VIDEO)
Number of enterprises put into operation in Iran's Ardabil Province up
Water problems center to be created in Uzbekistan’s Khorezm region
Khazar Consortium opens tender for purchase of lubricating oil
Azerbaijan’s Baku Telephone Communications opens tender
Georgia sees increase in COVID-19 cases
Number of shells fired at Tartar district by Armenian Armed Forces revealed
German minister says partial lockdown could last until Spring 2021
Kazakhstan doubles export to Afghanistan
Price of apartments in Iran’s Tehran rising
Autumn grain sowing carried out on large area of land in Azerbaijan
Azerbaijan’s Baku Metro to buy inert materials through tender
Weekly review of Azerbaijani currency market
Azerbaijani president's assistant, diplomatic missions visiting Tartar (PHOTO)
Turkish soldiers to soon begin their missions in Azerbaijan - Turkey’s VP
Georgian Basisbank launches service for purchase of government securities
Azerbaijan shows footage of Kalbajar's Istisu village (VIDEO)
Uzbekistan reveals its COVID-19 data for November 28
Turkey issues 10M2020 data on cargo, passenger traffic in Adnan Menderes Airport
Assistant to Azerbaijani president, Karabakh football club to visit Tartar, Aghdam cities
Azerbaijani oil prices reaching $49 per barrel
Tesla could widen release of 'self-driving' software in two weeks
Iranian currency rates for November 28
Kazakhstan’s Intergas Central Asia opens tender for equipment modernization
Turkish municipality to rent vehicles via tender
Turkmenistan, EU discuss prospects for developing bilateral contacts
Iran seeks to cooperate in auto sector with foreign countries
Azerbaijani flag raised in liberated Kalbajar city after 27 years (VIDEO)
OPEC+ likely to roll over its current production cut at least until end-March 2021
Brazil's COVID-19 death toll nears 172,000
826 new coronavirus cases in 24 hrs, total at 130,039
Georgian Poti FIZ plans to implement production of high-tech electrical devices in 2021
Chinese mainland reports 6 new imported COVID-19 cases
British, Irish prime ministers discuss EU trade negotiations
Kazakhstan increases exports to Georgia multifold despite COVID-19
France reports 957 new COVID-19 deaths, hospitalizations down
76 more coronavirus patients die in Moscow in past day
OPEC+ monitoring committee postpones meeting on oil production cuts deal in 2021 to Sunday
Brexit goes down to the wire: EU and UK say big differences remain
Iran expected to reduce potato production
Azerbaijan national team won silver and bronze medals at 36th European Championship in Ukraine
Diesel fuel production down in Azerbaijan
Кazakhstan Electricity Grid Operating Company opens tender to buy batteries
Export of grain and legumes by Turkey to Iran down
Turkey registers nearly 30,000 new coronavirus cases as recoveries surpass 390,000
Kazakhstan has high hopes for homegrown COVID-19 vaccine - Minister
Georgia expect stabilization of pandemic with the expansion of restrictions
Iraq reports 2,545 new COVID-19 cases, 547,215 in total
Resolution adopted by French Senate is gross violation of int'l law - Honorary Member of French Parliament
Erdoğan urges public caution against COVID-19 in Turkey amid violations
76 Iranian professors among world top 2% scientists
Monetary policy in Georgia remains tightest among CIS - Renaissance Capital
Representatives of Kyrgyzstan take part in XVIII meeting of CSTO ICMEC
Britain records 16,022 new coronavirus cases, 521 new deaths
Azerbaijani gymnasts reach finals of 36th European Championship in Rhythmic Gymnastics in Ukraine
Turkish political parties condemn French Senate’s resolution on Karabakh
World Maritime University, Georgia aim to develop maritime education, capacity-building activities
Georgia makes giant strides in transposition of energy efficiency acquis
Cash receipts from Azerbaijan to Georgia increases
Number of debit cards in Azerbaijan increases
Uzbekistan increases raisins export to Netherlands
Georgia to subsidize wheat flour price
IAEA to implement multiple projects in Georgia
Uzbekistan, Hungary consider establishing Uzbek-Hungarian Business Council
Uzbekistan confirms repayment schedules on ADB loan for solid waste cleaning
Percentage of problem loans in Azerbaijan down
Eni Turkmenistan Ltd opens tender for vehicles provision
Tree-planting campaign continues in Azerbaijan's Gubadli (PHOTO)
Azerbaijan raises commercial gas production
COVID-related quarantine may be strengthened in Kazakhstan in December
German Bundestag welcoming cessation of hostilities in Karabakh for sustainable peace
Spain names main Turkmen sectors of its interest
Iran to follow FATF-related bills
French Development Agency puts emphasis on increasing solar and wind capacity integration in Georgia
Putin to hold annual press conference via video link on December 17
Share of Austria in total import of Azerbaijan increases
Kazakhstan, Canada discuss prospects for agriculture co-op
All news