Note: Iran's Oil Policy Change Due to Fear of U.S. Crude Oil Exports

A report on Sunday, March 11, from the Wall Street Journal, citing Bijan Zanganeh, the Minister of Oil of the Islamic Republic, indicates Iran's support for increasing OPEC crude oil production in 2019 and adjusting global oil prices to around $60 per barrel, reflecting a shift in Iran's traditional policies towards supporting higher crude oil prices due to concerns over rising U.S. oil exports. Before the Iranian oil minister's support for the OPEC production increase policy was announced, Saudi Arabia's energy minister had mentioned on March 25 (5 Esfand) the possibility of increasing OPEC crude oil production in 2019. To prevent further declines in crude oil prices, a decision by 24 OPEC and non-OPEC countries was made to reduce global oil production by 3 million barrels per day in 2017, with this joint decision set to continue until the end of 2018, subject to review every six months. Zanganeh justified Iran's new oil policy and the acceptance of a $60 per barrel oil price by citing the entry of U.S. offshore oil into the market, which could grow more rapidly if global oil prices increase. Currently, Brent oil is priced around $65 per barrel, and West Texas Intermediate (WTI) crude oil is slightly above $61 per barrel. Many media outlets and analysts attributed the U.S. military occupation of Iraq in March 2003 and the overthrow of Saddam Hussein's regime to oil, ensuring the flow of Gulf crude oil to global markets and preventing an energy crisis, rather than 'eliminating the threat of weapons of mass destruction by Saddam Hussein's regime.' Fifteen years later, the U.S. is one of the top three crude oil producers in the world, producing over 10.37 million barrels per day, and according to the International Energy Agency's forecasts, U.S. oil production is expected to reach 11 million barrels per day by the end of this year, surpassing Russia in this regard. Despite forecasts of a global oil demand increase of at least 1.5 to 2 million barrels per day this year and next, Russia and Saudi Arabia, two major oil producers, are closely monitoring the entry of this new competitor into global markets with some concern. An increase in global oil prices above $70 per barrel could lead to a rise in U.S. shale oil production and supply. According to data released by the U.S. federal government, in December of last year, a shipment of about 700,000 barrels of U.S. condensate, equivalent to very light and high-quality crude oil, was sold to the United Arab Emirates, and this shipment, sent from Houston to Abu Dhabi, was unloaded in the Gulf during the same month. Until last year, before the political tensions between the UAE and Qatar, Abu Dhabi met its refinery needs with condensates from Qatar. The U.S. condensate shipment sold to Abu Dhabi is similar to the cargo of the Sanchi oil tanker belonging to the National Iranian Tanker Company, which was carrying 700,000 barrels of condensate from Assaluyeh to South Korea and sank on January 6 (16 Dey) after colliding with a Chinese bulk carrier named 'Crystal' before reaching its destination in Chinese waters. U.S. oil exports were around 100,000 barrels per day in 2013, and this capacity increased to 1.53 million barrels per day by November of last year. The upward trend in U.S. crude oil production will accelerate if global crude oil prices rise. Based on the quota set by the Organization of the Petroleum Exporting Countries (OPEC), Iran is allowed to produce 3.8 million barrels of oil per day. To maintain its current crude oil production capacity, Iran requires an annual investment of $10 billion, and if production increase plans are implemented to reach 4.2 million barrels per day, the necessary investment could rise to $20 billion. Iran's total foreign exchange earnings from the sale of crude oil, petroleum products, condensates, and gas liquids were estimated at $41 billion and 123 million last year, leaving little room for sufficient investment in oil production due to the government's extensive foreign exchange needs. The improvement in Iran's oil production and exports over the past two years has been due to the July 2015 nuclear agreement, and if the U.S. follows through on its threat to withdraw from the JCPOA in May of this year, Iran's oil production and export situation will gradually face more challenges. Thus, the recent recommendation by Zanganeh regarding increasing OPEC crude oil production capacity and reducing crude oil prices out of fear of increased U.S. oil exports entering the market is neither aligned with Iran's production capacity increase capabilities nor with Tehran's past policies aimed at supporting global oil prices. Having fallen to the sixth and seventh ranks of oil exporters, Iran, once called the 'Eagle of OPEC,' has long lost its influence in global oil markets and price regulation, particularly after the imposition of nuclear sanctions in 2012, becoming the fifth wheel among oil-exporting countries.