(MENAFN- Gulf Times) 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 Organisation 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% of the world's oil, kept its output quota at 30mn bpd at a June 5 meeting in Vienna, choosing to defend market share and force higher-cost producers such as US 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 US plan to complete talks with Iran by June 30 to end the decade-long impasse over its atomic programme. The Arabian Gulf nation, which is allowed to ship about 1mn bpd, could export more crude with the lifting of sanctions even if prices fall, IRNA reported Asali as saying.
Brent crude slumped almost 50% in 2014 amid an oversupply estimated by Venezuela at 2mn to 2.5mn bpd. Prices rose 9.7% this year as the glut prompted investment cutbacks and a collapse in the number of US oil rigs.
"With the Opec meeting behind us, investors will be searching for a catalyst to provide direction for oil prices," Morgan Stanley analysts including Longson, said in a separate report dated June 8. "The market will increasingly turn its attention to the risk that Iran could add new supply to the market."
Iran isn't satisfied with current prices, and most Opec members think $75 a barrel is fair, Iranian Oil Minister Bijan Namdar Zanganeh said on June 5. The country produced 2.8mn barrels of crude a day in May, more than Venezuela and Nigeria, according to data compiled by Bloomberg. More supplies may emerge as there's a "sizable gap" between what it's exporting now compared with the past, according to Morgan Stanley.
Russia may start importing crude from Iran this week as part of an oil-for-goods agreement, Zanganeh said over the weekend after attending the Vienna meeting. Opec is producing 800,000 bpd over its collective quota, IRNA reported Asali as saying. Members agreed on Friday to keep the target unchanged for another six months.
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