Iran Defends 'Cheap Oil' for the First Time

The international affairs manager of the National Iranian Oil Company states that cheap oil benefits producers. He claims that oil prices will not exceed $60 in the next two years. This is the first time an official from Iran has defended cheap oil. In Azar (December) of this year, when OPEC member countries failed to reach an agreement on reducing oil production to raise global prices, Iran heavily criticized Saudi Arabia for not agreeing to cut production. Saudi Arabia's argument was that there is currently excess oil produced globally, but with falling oil prices, production in some offshore fields, as well as U.S. shale oil, will no longer be economically viable, forcing them to lower their production ceilings. Thus, both OPEC countries will maintain their oil markets and oil prices will rise again. Now, Mohsen Qamsari states that cheap oil is beneficial for Iran. The Shana website, affiliated with the Iranian Ministry of Oil, and the Mehr news agency reported on Thursday and Friday, March 14 and 15, that for the first time in recent months, Iran's crude oil exports have decreased to less than one million barrels per day, while at the same time, the export of black gold by Iran's competitors such as Iraq and Saudi Arabia has increased to various markets. The report adds that 'on the other hand, with the free fall of black gold prices and the onset of a price war, especially by Gulf Arab countries, energy economists refer to these events as a war for greater market share in oil.' Global oil prices have dropped from about $108 in the first half of last year to around $60 this week. As reputable international organizations, including the International Energy Agency, have predicted, oil prices are not expected to rise significantly in the medium term. Seyed Mohsen Qamsari, detailing the latest status of Iran's crude oil exports and sales, noted the efforts made to gain a larger share of the oil market, stating that all oil suppliers worldwide are striving to hold a larger market share, making oil prices competitive. The international affairs manager of the National Iranian Oil Company emphasized the potential for a nuclear agreement between Iran and the West, stating, 'If these negotiations yield results and the oil purchase sanctions are lifted, we will seek our share of the market, as during the sanctions, Iran's oil sales share was reduced by half, and with the lifting of sanctions, we will do our utmost to reclaim this share.' Before Western sanctions against Iran in mid-2012, Iran's crude oil exports reached 2.2 million barrels per day, but this figure fell to about one million barrels in 2013. After the Geneva nuclear agreement, international statistics indicate that Iran's oil exports increased somewhat, but since January of this year, it has returned to the one million barrels per day range. This manager of the National Iranian Oil Company stated that 'the sale of Iranian oil is not sanctioned, but its purchase is sanctioned,' asserting that therefore the activities of the international management of the National Iranian Oil Company to increase sales and have a larger market share are legal and a natural right. Qamsari explained that currently, oil is sold only to countries with permits, which include China, India, South Korea, Japan, Taiwan, and Turkey. Regarding oil price discounts, the international affairs manager stated that according to traditional contracts, our prices are officially announced, and no discounts are considered for specific countries. This statement comes as international news agencies previously reported on the competition among Iran, Iraq, Saudi Arabia, and some other OPEC members to offer greater discounts to oil customers. For example, Bloomberg reported in Azar that Iran offered greater discounts to its customers for oil deliveries in January. Qamsari, referring to the decline in oil prices in global markets, stated, 'I always emphasize that unreasonably high oil prices are detrimental to producers in the long run, as rising prices make research and development of new energy sources economically viable, and subsequently, the production of these alternative energies becomes economical, which can ultimately harm oil producers.' Qamsari continued, 'Accordingly, the policy of lowering oil prices may harm producers' economies in the short term, but in the long term, prices should be viewed in a way that does not raise competition with alternative energies.'