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Iran is dismissing a report that it plans to offer steep discounts on oil to many customers, particularly in Asia, when it returns to the global energy market sometime in 2016.
In an interview with Iran’s Islamic Republic News Agency (IRNA) on Sunday, Oil Minister Bijan Namdar Zangeneh said Iran plans to offer only what the agency described as “regular and customary” discounts that often are available to any potential customer.
Zangeneh was responding to a report by Reuters, based on anonymous sources in India, that Iran’s agents had changed its tactics in talks with prospective buyers. Rather than quoting their country’s own terms and prices for oil sales, they were asking potential buyers for suggestions about how Iran’s oil might be more competitive with that of its rivals.
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Iran’s standard offer for customers in India, the world's second-largest consumer of Iranian oil, is 90 days’ credit, free shipping and modest discounts on the oil itself.
“I haven’t seen [Iranian oil negotiators] as flexible as they were in the recent meeting,” said a source who works at an Indian refinery who met last week with S.M. Ghamsari, the international affairs director of the National Iranian Oil Co., according to the Reuters article.
”They have sought our feedback on how to make pricing of their crude competitive.”
The story also quoted four other sources at an Indian refinery as saying Ghamsari seem prepared to consider lower prices than usual, as well as offer new grades of crude oil, in an effort to boost Iran’s market share. “Naturally we will see if Iranian oil fits into our model,” Reuters quoted one source at an Indian refinery that doesn’t already buy Iranian oil. “If it is economical, only then we will go for it.”
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None of this is true, however, Zangeneh insisted. Certainly, he said, Iran is eager to recover the market share it lost with the imposition of Western sanctions over its nuclear program, but not through cutthroat discounts.
“Iran’s oil exports will double if we increase the country’s production capacity by 1 million barrels,” Zangeneh said. “The sharp decline in oil prices will mostly harm countries which have collected Iran’s share in the market. … We need to regain our share in the market in order to avoid the need to ask OPEC countries to make room for Iran.”
Actually, for months Iran has been urging the cartel to cut production to do just that in order to prevent a further drop in oil prices, which have been on a steep decline since June 2014. But OPEC has steadfastly maintained and even exceeded its self-imposed output ceiling of 30 million barrels per day, and at its ministerial meeting on Dec. 4 dispensed with that ceiling altogether.
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In July, Iran agreed to greatly limit its nuclear research in exchange for a lifting of sanctions after months of negotiations with Britain, China, France, Russia and the United States – the five permanent members of the United Nations Security Council – as well as Germany.
Yukiya Amano, the director general of the U.N.’s nuclear overseer, the International Atomic Energy Agency, said the organization should be able to very that Iran has complied with the terms of the agreement as early as the end of January 2016.
In his interview Sunday with IRNA, Zangeneh repeated Iran’s long-held belief that it could ramp up oil production by 500,000 barrels per day virtually as soon as the sanctions are lifted, and could double that increase “after a short while.”
By Andy Tully of Oilprice.com
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Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com