Return of Iranian oil may cause more OPEC tensions
LONDON, July 19
The return of oil from Iran following the landmark nuclear energy deal with world powers could create fresh tensions within the Organisation of the Petroleum Exporting Countries (OPEC) but may reinforce the cartel’s output strategy, analysts say.
Tehran and major powers — Britain, China, France, Germany, Russia and the United States — clinched a historic agreement in Vienna on Tuesday aimed at ensuring Iran does not obtain a nuclear bomb, and which paves the way for the removal of sanctions and 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 and billions of dollars in frozen assets unblocked.
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 OPEC — whose 12 members including Iran pump one third of global oil — is mindful that Iranian oil could worsen a global supply glut and 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 and fend off competition from booming US shale.
Oil prices sank last week, hit by the Iran nuclear deal and the strong dollar, raising jitters among some OPEC members who next meet on December 4.
London Brent oil slid to about $56 per barrel and New York’s West Texas Intermediate dropped to around $52 a barrel. Poorer OPEC members Angola, Algeria and 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 and 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 and there could be pressure for an emergency meeting before December.”