Iran backs moves to stabilise oil market – ‘Tehran won’t relinquish market share’

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TEHRAN, Feb 17, (Agencies): Iran’s Oil Minister Bijan Zanganeh said Wednesday his country supported steps taken by other major producers that could stabilise the market and lead to price hikes for crude.

But after a meeting with his Iraqi, Venezuelan and Qatari counterparts in Tehran, a day after Saudi Arabia, Russia and several other big producers agreed to freeze output, Zanganeh did not say Iran would follow suit.

“We look forward to the beginning of cooperation between OPEC and non-OPEC countries and we support any measure that can stabilise the market and increase prices,” he was quoted as saying by the ministry’s news service, Shana.

“This is a first step but we need others. We look forward to the start of cooperation between OPEC and non-OPEC countries.”

Zanganeh’s comments came a day after Saudi Arabia, OPEC’s kingpin, and Russia, which is not a member of the cartel, agreed to cap output at January levels after months of low prices caused by a global supply glut.

OPEC Gulf producers Qatar, Kuwait and the UAE, as well as Venezuela said they would join the Russian-Saudi pact, aimed at tackling a growing oversupply and helping prices recover from their lowest in over a decade.

But Iran is the major obstacle to the first joint OPEC and non-OPEC deal since 2001, having pledged to increase output sharply to regain market share lost during sanctions.

“Asking Iran to freeze its oil production level is illogical … when Iran was under sanctions, some countries raised their output and they caused the drop in oil prices.” Iran’s OPEC envoy, Mehdi Asali, told the Shargh daily newspaper before the talks on Wednesday.

The sanctions, imposed over Iran’s nuclear programme, were lifted last month after an agreement with world powers, allowing Tehran to resume selling oil freely in international markets.

Iran exported around 2.5 million barrels per day of crude before 2012, but sanctions cut that to around 1.1 million bpd.

Tehran has pledged to raise supply by around 1 million bpd in the next 6-12 months and on Wednesday some Iranian banks were reconnected to the SWIFT global transaction network, which will allow it to facilitate banking business.

Iranian barrels would only add to the global glut, which has been fuelled by US shale output and a decision by Saudi Arabia to pump at full capacity to drive higher-cost producers out of business.

The world is already producing more than 1 million bpd than it consumes, with oil stockpiles at record levels.

As a result, prices fell below $30 per barrel in January from as high as $115 in mid-2014, hammering the finances of Russia, Saudi Arabia and other producers.

Brent oil futures rose over 5 percent on Wednesday after losing as much as 4 percent the day before.

“A freeze is not the same as a cut, and somewhat disingenuously, keeping crude production at January levels actually implies higher-than-expected annual output … and so can hardly tackle the current market oversupply,” JBC Energy said in a note.

Two non-Iranian sources close to the OPEC discussions told Reuters on Tuesday that Iran might be offered special terms as part of an output freeze deal. “Iran is returning to the market and needs to be given a special chance, but it also needs to make some calculations,” said one source.

The sources did not elaborate on the special terms, which could be anything from setting limited production increases to linking future output rises to a recovery in oil prices.

Olivier Jakob from Petromatrix consultancy said that if Saudi Arabia were to freeze output at January levels, the kingdom would need to cut exports by 500,000 bpd in the summer months, when it burns more oil for power generation at home.

“The production freeze can therefore be seen as an un-official way for Saudi Arabia to make some room for the restart of the Iranian exports,” he said.

The last global deal in 2001 saw Saudi Arabia persuade Mexico, Norway and Russia to contribute to production cuts, although Moscow did not follow through and raised exports instead.

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