Monday, June 5, 2023
HomeHeadlinesOPEC+ would seek to bring Iran into oil supply deal

Subscribe

To our FREE newsletter
Get all the latest maritime news delivered straight to your inbox.

OPEC+ would seek to bring Iran into oil supply deal

OPEC+ will work to integrate Iran into its oil supply-limiting accord should agreement be reached on reviving its nuclear deal with world powers, sources close to the group said, seeking to avoid market share competition that could hit prices.

A successful outcome to the talks could lift U.S. sanctions on Iran’s exports, according to the International Energy Agency, potentially bringing 1.3 million barrels per day (bpd) of Iranian oil back into the market. That could ease tight global supply and take some heat out of a rally that has taken benchmark prices to just a few dollars short of $100 a barrel.

Due to the impact of sanctions on its exports, Iran is exempt from the existing deal between the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, to limit oil supply. While that exemption allows Iran to boost output, OPEC+ would eventually seek to bring Iran into the accord, sources said.

“It is very likely OPEC will adjust Iran into the deal, as there is no other option,” said an OPEC+ source, who added that an agreement on reviving the nuclear accord looked close.

A source familiar with Iranian thinking said Iran would first seek to restore its lost output, but would likely, after talks with OPEC+, agree to a quota. Iran is one of the five founding members of OPEC.

Iran is pumping about 2.5 million bpd, some 1.3 million bpd less than in 2018 when former U.S. President Donald Trump withdrew the United States from the nuclear accord and re-imposed sanctions, drastically cutting Tehran’s oil income.

“With the lifting of sanctions, Iran will increase its oil production according to its facilities, capabilities and interests, to compensate for its lost oil revenues,” the source familiar with Iranian thinking said.

“In my opinion, OPEC+ will set a quota for Iran’s oil production but will apply it gradually, and Iran will accept the quota with some bargaining to show its support for OPEC.”

‘OPTIMISTIC’ ON IRAN ISSUE

OPEC Secretary General Mohammad Barkindo, asked if OPEC+ would work out a new supply agreement that included Iran, said the group’s track record gave grounds for confidence.

“Having survived the last five years since the establishment of the historic partnership between OPEC and non-OPEC that helped us to navigate through two oil cycles, we have every reason to remain reasonably optimistic going forward,” he told Reuters.

OPEC+ is gradually boosting oil output after making record cuts in 2020 when demand collapsed due to the pandemic. But it has failed to hit its target because some producers did not make the investment or do the maintenance needed on oilfields during the pandemic to keep those facilities ready to increase output quickly.

For the United States, it would make sense to lift the sanctions on Iran to help lower prices given the domestic pressure the administration of President Joe Biden is facing due to rising inflation. The United States may also be considering that any output from Iran would ease the impact on global oil markets of any conflict between Russia and the Ukraine, a source familiar with Russian oil thinking said.

“The U.S. will surely lift the sanction from Iran as soon as they decide to put more pressure on Russia given the current tensions over Ukraine,” the source said. “Iranian oil will cool oil prices.”

PLUG QUOTA GAP

OPEC+ sources have also made the point that extra Iranian supply could also help plug the hole in OPEC’s output target misses.

OPEC+ has not dealt with this issue by, for example, having larger producers step in to boost output to compensate for those who cannot. These talks can be difficult as they encroach on sensitive topics such as national prestige and market share.

But any nuclear deal will most likely force OPEC+ to rearrange its quotas to make room for Iranian barrels, as in previous years.

When Tehran last returned to the fold from U.S. sanctions in 2015-2016, it negotiated strongly among oil producers for its own interests by first refusing to take part in a proposed output “freeze” to address oversupply as it recovered output.

Later, during talks to form OPEC+ in 2016 while the other producers were agreeing on production cuts, Iran eventually secured a quota that allowed it to increase output, citing the impact of sanctions that had squeezed its market share.

Still, a third OPEC+ source said the group would not shy away from talks on a return of more Iranian oil to the market, and has a track record of tackling similarly thorny issues.

“We will deal with it very well,” this source said. “OPEC has been around for 60 years and we can deal with all issues.”

Source: Reuters

Related Posts

Video

Finance & Economy
Shipping News
Ports

BW LPG appoints new CFO

BW LPG announced that it has appointed Ms Samantha Xu as Chief Financial Officer (CFO), effective 1 September 2023. Ms Xu has over 20 years...

Frontline Posts Highest First Quarter Results Since 2008

Frontline plc reported unaudited results for the three months ended March 31, 2023: Highlights Highest first quarter profit since 2008 of $199.6 million, or $0.90 per...

Diana Shipping posts slightly lower Q1 profit; takes out $123m in loans

Diana Shipping reported net income of $22.7 million and net income attributed to common stockholders of $21.3 million for the first quarter of 2023....

CMA CGM Profit Eases as Container Transport Demand Wanes

CMA CGM expects its profit to ease further for the rest of the year after a first-quarter decline, as an uncertain economy and influx...

Seanergy ‘well positioned to benefit from positive trend in Capesize market’

Seanergy Maritime Holdings Corp., announced its financial results for the first quarter ended March 31, 2023, and declared a quarterly dividend of $0.025 per...

Taiwan Shipping Firms Set to Hand Out Bumper Bonuses Again

Taiwanese shipping companies are handing out bumper mid-year bonuses despite a slump in global...

Baltic index hits over 3-month low amid lower coal imports

The Baltic exchange’s main sea freight index extended losses for the 15th session straight...

Baltic index falls for the month as vessel demand wanes

The Baltic exchange’s main sea freight index recorded its first monthly decline in four...

North Korea missile tests endanger shipping, UN maritime agency told

North Korean missile tests are endangering the safety of commercial shipping in busy sea...

Singapore Clamps Down on Tankers as Dark Fleet Grows

Singapore’s detentions of oil and chemicals tankers have surged since early last year, highlighting...

DP World Completes Terminal Expansion Project Vancouver Port

DP World has completed the AED954 million ($259.78 million) Centerm expansion project, increasing container throughput at the Port of Vancouver by 60 percent. The terminal...

DP World completes AED 954 million Vancouver port expansion

DP World and the Vancouver Fraser Port Authority have celebrated two historic events – the completion of the Centerm Expansion Project at DP World...

Alexandroupolis port gets 24 million euros of EU funding

Greece has secured 24 million euros ($26 million) in European Union funding to upgrade its northern Aegean Sea port of Alexandroupolis, privatisation agency HRADF...

Port Hedland Iron Ore Exports Down 5% in April

Pilbara Ports Authority (PPA) has delivered a total monthly throughput of 57.7 million tonnes (Mt) for April 2023. This throughput was a two per cent...

APM Terminals Reveals $1 Billion Investment in Brazil

APM Terminals’ CEO Keith Svendsen has pledged an investment of about US$1 billion in the company's Brazilian operations up to 2026. The amount includes around...