Iran Vows More Oil Exports in Sign OPEC to Keep Exceeding Target

June 7, 2015

Bloomberg Business

Iran’s pledge to sell more crude signals that OPEC members will continue pumping above the group’s production target, exacerbating the global surplus.

Iran can double oil exports within six months if international sanctions are lifted, state-run Islamic Republic News Agency reported, citing Mehdi Asali, the country’s representative to the Organization of Petroleum Exporting Countries. There’s a risk of more supply coming into the market, Adam Longson, an analyst at Morgan Stanley, said in a June 5 video report.

OPEC, which supplies about 40 percent of the world’s oil, kept its output quota at 30 million barrels a day at a June 5 meeting in Vienna, choosing to defend market share and force higher-cost producers such as U.S. shale companies to slow drilling. The group has been pumping above its allocation for a year, swelling a global glut and hampering Brent’s recovery from a six-year low in January.

“If a nuclear deal emerges and oil sanctions are lifted partially or completely, we’re going to see more Iranian oil coming onto the market,” Victor Shum, vice president at energy consultant IHS Inc., said by phone from Singapore. “The Saudis are going to be much more determined to defend market share so there will be even less chance of a production cut. There will be more OPEC oil, including Iranian.”

World powers including Russia and the U.S. plan to complete talks with Iran by June 30 to end the decade-long impasse over its atomic program. The Persian Gulf nation, which is allowed to ship about 1 million barrels of oil a day, could export more crude with the lifting of sanctions even if prices fall, IRNA reported Asali as saying.

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