OPEC Members Negotiate to Extend Duration and Further Reduce Oil Production

As OPEC member countries prepare to negotiate extending the duration and volume of the oil production cut agreement, statistics indicate that Iran has achieved the highest growth in oil revenues among OPEC members in the first quarter of 2017 compared to the fourth quarter of the previous year. According to Bloomberg News, Iran's daily oil export revenue has increased to about $15 million in the first quarter of the year, surpassing Saudi Arabia and Iraq in this regard. The International Energy Agency has stated that despite OPEC's daily production decrease from 33.3 million barrels to 31.9 million barrels, the total revenue of the organization has increased by about $75 million per day in the first quarter of this year, with Iran showing the most growth. This is attributed to the increase in Iran's oil production. The U.S. Energy Information Administration also reported in its latest report published on May 16 that Iran's oil exports in the first four months of this year reached $18 billion, while Iran's total oil revenue for the entire previous year was $29 billion. Negotiations for further and long-term production cuts began late last year when OPEC member countries and 11 non-member countries agreed to reduce daily production by 1.8 million barrels. Initially, the duration of this agreement was set for six months, but slower-than-expected global inventory reductions prompted OPEC to consider extending this period. Following the lifting of sanctions last year, Iran's oil industry has increased production in an effort to regain its market share from other oil producers. Iran has been exempted from the overall production cut program of OPEC members by insisting on its right to increase production. OPEC members will meet on Thursday, May 25, in Vienna, Austria, to decide on extending the production cut program. Some OPEC members, such as Saudi Arabia, Iraq, Algeria, and Russia, the largest non-OPEC country, are calling for a nine-month extension of the production cut agreement, while Kuwait has even stated that it wants a greater reduction in oil production from OPEC and other countries. According to the state news agency IRNA, Iranian Oil Minister Bijan Zangeneh announced on Wednesday that it does not matter to Tehran whether the oil production cut agreement is extended for six months or nine months. He stated that Iran supports any decision made by OPEC. Zangeneh mentioned that there is consensus among members regarding the extension of oil production cuts, and the only issue is the duration of the extension. Brent oil prices last year fell to less than half of the peak in 2014, which was $114 per barrel. Since the OPEC agreement in November of last year, Brent oil has been trading at an average of $54 per barrel. According to the U.S. Energy Information Administration, Iran increased its oil production by about 800,000 barrels per day last year. Iran's share of the oil market has reached 8%, equivalent to pre-sanction levels. Iran is the third-largest oil producer in OPEC after Saudi Arabia and Iraq. Bloomberg reported that Bijan Zangeneh recently stated that Iran's oil exports have doubled since the lifting of sanctions, reaching about 2.5 million barrels per day. Shipping data also indicates that the loading of Iranian oil shipments is increasing, reaching 1.8 million barrels. According to this report, the Iranian oil minister said all signs indicate that OPEC members want to extend the agreement, and we will cooperate with whatever is agreed upon. Bloomberg's collected data shows that Iran produced 3.76 million barrels of oil per day in April, which shows a slight decrease compared to 3.8 million barrels per day in January. Khalid Al-Falih, Saudi Arabia's oil minister, said on Monday, May 22, that currently, there is a willingness for a nine-month extension of the production cut agreement. The U.S. Energy Information Administration's statistics indicate that continuing the production ceiling limitation program until the first quarter of 2018 will reduce existing reserves to the average of the past five years, which is a goal that OPEC is pursuing. According to this report, the risk facing OPEC is that only this organization does not benefit from the production cuts. The U.S. shale oil industry, which has strengthened during the period of declining oil prices, has increased production by up to 500,000 barrels per day. Meanwhile, OPEC is discussing reducing daily production to 9.3 million barrels, while American companies report an increase in annual oil revenues.