Bloomberg – Iran says Venezuela and Iraq will join it in blocking a proposal to increase oil production that’s backed by Saudi Arabia and Russia when OPEC and its allies meet in Vienna this week.
“Three OPEC founders are going to stop it,” Iran’s representative to the bloc Hossein Kazempour Ardebili said in comments to Bloomberg on Sunday. “If the Kingdom of Saudi Arabia and Russia want to increase production, this requires unanimity. If the two want to act alone, that’s a breach of the cooperation agreement.”
Iran’s comments show that OPEC members are set to clash when they meet later this week in Vienna to discuss the proposal to end global output cuts. The historic 24-nation pact has succeeded in its goals of balancing oil markets and lifting crude prices, and the two biggest producers want a relaxation of quotas as soon as next month. But while Saudi Arabia and Russia are pumping below capacity, many countries in OPEC including Iran and Venezuela would struggle to raise output even if their quotas were increased.
OPEC and its allies could consider a production increase of as much as 1.5 million barrels a day, Russian Energy Minister Alexander Novak said on Thursday. That would be enough to offset the supply losses from Venezuela and Iran foreseen by the International Energy Agency. Saudi Arabia has been discussing different scenarios that would raise production by between 500,000 and 1 million barrels a day, according to people familiar with the matter.
The alliance is also facing pressure from outside. U.S. President Donald Trump has continued to criticize the Organization of Petroleum Exporting Countries on his Twitter account. Worried about the impact of gasoline prices on mid-term elections, the Trump administration is lobbying hard for a surge in production.
“We call upon our brothers in OPEC and Russia that we do not need to appease Trump, who sanctions two OPEC founders and also Russia,” Kazempour Ardebili said. “We are sovereign nations driven by our own responsibilities and values. The whole world has to stand against these arrogant attitudes — and will.”
U.S. sanctions will contribute to Iran and Venezuela potentially losing almost 30 percent of their oil output next year, requiring extra supplies from the group’s Gulf members, the International Energy Agency said last week.
“No changes took place in market fundamentals, although” the U.S. Energy Information Administration and IEA “rushed to say differently,” Kazempour Ardebili said.
“The market is well-supplied, and OPEC should abide by its decision up to the end of the year,” he said. “I am confident many other OPEC members feel and act the same.”