Oil Price | Tim Daiss: In recent months, it’s been difficult to hear any positive statements coming from Iran’s troubled oil sector, particularly since President Trump decided in May to reinstate tough sanctions over what he sees as Iran’s non-compliance with the 2015 nuclear accord it reached with the U.S. and other western powers.
However, Iranian Oil Minister Bijan Zanganeh praised OPEC on Saturday over what he claimed was the oil-producing cartel’s ability to reach an oil output agreement despite intense internal political differences. On December 7, the so-called OPEC+ group of producers, which includes production heavyweights Saudi Arabia and non-OPEC member Russia, agreed to trim production by 1.2 million b/p for six months, starting in January, with the deal to be revisited in April.
The move is intended to drain down global oil markets amid supply worries as the U.S., Saudi Arabia and Russia, the world’s top three oil producers, pump at record levels. It also comes as oil demand growth concerns persist amid ongoing trade tensions between the U.S. and China. “OPEC … has shown the capacity in which members can hold talks and reach important results regarding their common interests despite having the most intense political disputes or even military conflicts (such as during the Iran-Iraq war),” Zanganeh said on his Twitter account.
Iran’s positive spin
This is the first positive spin that Iran’s media-savvy oil minister has put on OPEC developments in months. Though OPEC+ reached a deal on December 7, including waiving Iran from having to cut output given its problems with fresh sanctions, the upbeat tone simply won’t last.
Vying for regional dominance
Both Iran (OPEC’s third largest producer) and Saudi Arabia (OPEC’s largest producer and de facto leader) are vying for geopolitical hegemony in the Middle East, mostly through proxy wars in Yemen and Syria. The two countries also have differing opinions on how OPEC should conduct itself as a unit, how it should respond to President Trump’s seemingly constant Tweets calling for high OPEC output to keep a lid on oil prices, and more poignantly, how the cartel should work with Russia and other non-OPEC oil production partners.