Return of Iranian oil may cause more OPEC tensions

Return of Iranian oil may cause more OPEC tensions

London (AFP) – The return of oil from Iran following the landmark nuclear energy deal with world powers could create fresh tensions within OPEC yet may reinforce the cartel's output strategy, analysts say.

Tehran & major powers — Britain, China, France, Germany, Russia & the United States — clinched a historic agreement in Vienna on Tuesday aimed at ensuring Iran does not obtain a nuclear bomb, & which paves the way for the removal of sanctions & the gradual return of Iranian oil to the global market next year.

The accord puts strict limits on Iran's nuclear activities for at least a decade. In return, sanctions that have slashed the oil exports of OPEC's fifth-largest producer will be lifted & billions of dollars in frozen assets unblocked.

p>The Islamic republic's exports could reach a potential 2.4 million barrels per day (bpd) in 2016, from 1.6 million bpd in 2014, according to data from economist Charles Robertson at investment bank Renaissance Capital.

The Organization of the Petroleum Exporting Countries — whose 12 members including Iran pump one third of global oil — is mindful that Iranian oil could worsen a global supply glut & depress oil prices further.

OPEC decided at its last meeting in Vienna in June to maintain output levels, extending its Saudi-backed strategy to preserve market share & fend off competition from booming US shale.

Oil prices sank last week, hit by the Iran nuclear deal & the strong dollar, raising jitters among some OPEC members who next meet on December 4.

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OPEC decided at its last meeting in Vienna in June to maintain output levels, extending its Saudi-ba …

London Brent oil slid to approximately $56 per barrel & New York's West Texas Intermediate dropped to around $52 a barrel.

– Divisions in cartel –

Poorer OPEC members Angola, Algeria & Venezuela — whose budgets are heavily reliant on oil revenues — may again argue for less output to support prices, analysts say.

Richer Gulf producers, led by OPEC kingpin Saudi Arabia, remain eager for the cartel to preserve valuable market share & force out high-cost US shale producers with lower oil price levels.

"Clearly there is a divide between the countries on this new policy of seeking new market share," Ann-Louise Hittle at consultancy Wood Mackenzie told AFP.

"So it could be a contentious (OPEC) meeting & there could be pressure for an emergency meeting before December."

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Iran's exports could reach a potential 2.4 million barrels per day (bpd) in 2016, from 1.6 milli …

Faced with stubbornly low prices, Algeria's energy minister Salah Khabri indicated to state news agency APS last week that an emergency OPEC meet could be needed.

"The real problem starts when OPEC members commence to fight for quotas amid oversupply & market share disputes," said Jassem al-Saadun, head of Kuwait's Al-Shall Economic Consultants.

"If Iran, Venezuela, Algeria & Libya — all of which need to pump more — enter into a dispute with the Gulf producers, then it could be the end for OPEC," he warned.

Danske Bank analyst Jens Naervig Pedersen said such countries had been "really hit" by low oil prices.

But he added: "Their collective power is probably not tremendous enough to turn the mind of Saudi Arabia & the core members of OPEC in the Middle East."

– Global demand key –

In June, OPEC's collective output ceiling was left at 30 million bpd — where it has stood for three & a half years — despite an oil price collapse between June 2014 & January that slashed precious revenues.

The organisation appeared to shrug off calls from some members, including Iran, for a "reasonable" oil price of between $75 & $80 per barrel.

Oil is forecast to languish at an average of just above $62 per barrel next year, according to French bank Natixis.

Hittle cautioned that low price levels could slow down US shale energy production & make room for returning supplies from Iran — provided that global energy demand does not falter.

"When we look at fundamentals (of supply & demand) in the next year, with prices at this level we do expect to see a much slower growth in US oil supply," she said.

"So there might actually be some room for Iranian production to start up, as long as oil demand growth holds up & continues."

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Source: “AFP”

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