Panic in OPEC, others as Iran plan to raise output to 2M bpd in May

Latest announcement by Iran appears to have sent panic attack down the spines of the Organisation for Petroleum Exporting Countries, OPEC, and non-OPEC countries, as the country says it will ramp up oil export as high as two million by the third month of Iranian calendar year.

Iran’s first Vice President, Es’hag Jahangiri, told Tasnim news agency, saying the increase will begin on May 22.

According to Jahangiri, after the implementation of Iran’s nuclear deal with the world’s major power on January 16, the country’s oil export rose from one million barrel per day to 1.4 million, and it is expected to rise more in the future.

Iran which is OPEC’s second-largest producer after Saudi Arabia, wants to clear space for its gradual return to the market following the lifting of sanctions in January.

To this effect, Iran Oil Minister, Bijan Namdar Zanganeh, vowed to reclaim the country’s share of global crude oil export.

Last week, National Iranian Oil Company (NIOC) Managing Director, Rokneddin Javadi, said the country’s oil export, rose to 1.8 million barrel per day for the first time since 2012.

This recent plan by Iran as a key member of OPEC, seems to contradict OPEC’s move to reduce quantity of oil supply to the market in order to boost price.

OPEC and non-OPEC countries will come together for a meeting this month, to agree on an oil freeze quota which many believe will help boost their economies.

However, with Iran’s plan to increase export, experts doubt the country’s participation in the next meeting to agree on oil freeze.

A new report by the Institute for International Finance, has also said the rise of moderates in Iran’s elections has increased the chances of the nation joining the oil-producer coalition to freeze output.

According to IIF, Iran’s President, Hassan Rouhani, will advocate a compromise with Russia and some members of OPEC. Such move, according to IIF, would lift Brent crude to $50 a barrel by the year’s end as against $40.88 it has been hovering around.

 “The revenue from oil for Iran would be much higher even if they agree on freezing production at the current level rather than having no agreement which would keep oil prices low,” said Garbis Iradian, chief economist for Africa and Middle East at IIF. Moderates have more influence now than hardliners who oppose “foreigners’ looting of natural resources,” he said.

Iran has more negotiating power now than it did when Saudi Arabia, Russia, Venezuela and Qatar agreed to freeze production at January levels, Iradian said. It was in Iran’s interest to delay talks until it had enough time to recover from sanctions lifted in January and restore output closer to its pre-sanctions level of 3.6 million barrels a day, he said.

However, OPEC and non-OPEC countries are doing all it takes to drag Iran into talk, and stop the country from increasing export to its pre-sanction quota of 3.6 million per day, a move Iran seems not to align with at the moment.