Zanganeh: OPEC May Not Reach Agreement on Oil Production Increase

While Saudi Arabia and Russia emphasize increasing OPEC oil production, Iran states that it is unlikely an agreement will be reached at this week's OPEC meeting. Reuters reported on Tuesday, June 30, quoting Bijan Namdar Zanganeh, Iran's oil minister who is attending the OPEC meeting in Vienna: "I do not believe we will reach an agreement at this meeting. OPEC is not an organization that takes instructions from Donald Trump, the President of the United States. OPEC is not part of the U.S. Department of Energy." His remarks refer to Trump's tweets criticizing OPEC for "artificially controlling oil prices through production cuts." Recently, reports have emerged that the U.S. has asked Saudi Arabia and other Arab OPEC members to persuade their counterparts to increase oil production. Since last year, OPEC, along with several other countries led by Russia, has reduced its daily production by 1.8 million barrels to prevent excess oil production and to lower strategic reserves in global storage to raise oil prices. Reports from international organizations, including OPEC, the U.S. Energy Information Administration, and the International Energy Agency indicate that global strategic oil reserves have reached their lowest level in five years this year, and oil prices have risen to their highest level since 2014, currently around $75, which is nearly three times that of early 2016. OPEC will hold a meeting this Friday in Vienna, the capital of Austria and the organization's headquarters, to review the oil market situation. Saudi Arabia and Russia, which together account for more than 20% of global oil production, say that now is the time for a gradual increase in oil production. Russia, Saudi Arabia, and some OPEC members want to gradually increase oil production by 1.5 million barrels per day starting next month. This increase could compensate for the drop in oil production due to U.S. sanctions and Venezuela's situation. Recently, the International Energy Agency reported that by the end of next year, Iran's daily oil production is expected to decrease by 900,000 barrels and Venezuela's by 550,000 barrels. Before leaving Tehran for Vienna, Zanganeh also stated: "The current problem in the oil market is mainly the political tensions created by the U.S. President in the international political arena, not an imbalance in supply and demand." According to the official website of Iran's Ministry of Oil, he continued: "We believe that Mr. Trump supports high oil prices to keep shale oil development active in the U.S., but to escape public pressure in the U.S. against rising oil prices, especially after the U.S. withdrawal from the JCPOA, he attacks OPEC." Reuters writes that besides Iran, Venezuela, Iraq, and Algeria are also among the OPEC members opposing an increase in oil production. Alexander Novak, Russia's energy minister, states that global oil demand will increase in the third quarter of this year, and if production does not increase, global markets will face a supply shortage. Over the past two years, global oil demand has shown an annual increase of 1.5% and is expected to exceed 100 million barrels per day next year. Novak says that if OPEC members decide to increase production at this week's meeting, they can reconvene in September to assess the implications of this decision. Two sources informed Reuters that Saudi Arabia, Kuwait, and Oman are not in favor of a significant increase in oil production. Another source stated that although Russia and Saudi Arabia are pushing for a daily increase of 1.5 million barrels, this figure is actually a "tactical" number to negotiate with other producers for an increase of 500,000 to 700,000 barrels. Reuters also noted that it has seen a letter from Venezuela and Iran requesting negotiations on U.S. sanctions against both countries, but the OPEC secretariat has rejected this request.