Oil price fall inflicts more losses to Iran than oil embargo
Baku, Azerbaijan, March 28
By Umid Niayesh, Dalga Khatinoglu - Trend:
Iran has lost more revenues from sharp fall in crude oil prices since 2013 than the entire loss under the crude oil embargo since 2008, Fereydoun Barkeshli, former general manager at National Iranian Oil Company (NIOC) in OPEC and international affairs, told Trend March 28.
This would mean that from business point of view, Iran should welcome every opportunity, including an output freeze, if there is enough indications that Saudi Arabia and Russia are willing to help coordinate market balance, he added.
While 11 of OPEC's 13 members, which produce a half of the global oil, say they will attend oil production freeze talks next month in Doha, Iran and Libya have rejected to participate in this issue.
In February, Russia and OPEC's major oil producers, including Saudi Arabia, agreed to freeze oil production at the January levels.
Iran aims to produce four million barrels of oil per day. It suffered a severe decline in oil exports due to sanctions. Before the sanctions, the country used to export 2.3 million barrels of oil per day, but it could export only one million barrels per day up to January when the sanctions were lifted.
"I consider the Qatar meeting of major OPEC and non-OPEC ministers a major breakthrough, very much in line with OPEC tradition and style of shaping up and engineering international oil market," said Barkeshli, adding that in fact OPEC hadn't made such a gesture for years due to the fact that market somehow automatically balanced itself and that geopolitical factors de-linked themselves from oil market fundamentals.
"In fact, I personally watch the market with some excitement since it reminds me of the 1980s and 1990s when OPEC style was very much in place," he said.
However, this time the situation around the market is even more complicated due to the emergence of Russia and the shale oil, noted Barkeshli.
"OPEC and Russia, in fact, never looked eye to eye when it came to cutting production, though Russian delegates politely attended some OPEC conferences and gave indications of cooperation without giving up a single barrel to support market stability," he reminded.
"Freeze for freeze is a good start. It is true that neither Saudi Arabia nor Russia have much more to add to the market, but the gesture is positive and in OPEC tradition of reaching consensus one step at a time," said Barkeshli.
As for the upcoming Qatar summit, he said crude oil producers are welcome to attend, but there is no formal invitation, adding that Iran will certainly be the last producer to welcome participation in the meeting.
"Iran has been forced out of the market for some years and all other producers supplied [the crude] at full force," he added.
Barkeshli further explained that in the past when a country was deprived of its production quota it was supposed to pass its quota to another member as a quota loan.
"That meant that once a member was able to return to the market, it would get back its production quota. Of course, unfortunately OPEC gave up its quota policy back in 2012, but no producer expects Iran to freeze its crude production at current level," he said.
Barkeshli added that there are currently 1.23 billion barrels of idle crude oil in the market and over four millions barrels of excess daily production of crude oil is supplied to the market.
"In fact, I believe that even the current bellow $40 per barrel crude oil prices are supported by geopolitical factors mainly in the Middle East," he said.