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Iran Hints At Compromise To Raise Oil Output

Iranian oil tanker

Iran has suggested it could be open to a compromise on a small rise in OPEC oil output after earlier rejecting a plan by Russia and Saudi Arabia to increase production in response to consumer concerns over rising prices.

Iranian Oil Minister Bijan Zanganeh on June 20 said cartel members that had cut more than required in recent months could increase output back to higher agreed quotas.

Experts said that would effectively mean a slight increase from top producers such as Saudi Arabia, which has been cutting more deeply than required under previous policies designed to raise once-slumping prices.

A day earlier, Zanganeh had told reporters upon arrival at Organization of the Petroleum Exporting Countries (OPEC) headquarters in Vienna that "I don't believe at this meeting we can reach agreement."

Moscow and Riyadh have proposed reversing most of a 1.8 million-barrels-a-day cut in production that OPEC and other major producers agreed to in 2016 amid recent calls by the United States, China, and other major oil-consuming countries for relief from rising pump prices.

But Iran has signaled its opposition along with Iraq, Algeria, and Venezuela, three other influential OPEC members. Zanganeh cited recent demands for a production increase from U.S. President Donald Trump as a reason to oppose it.

Trump has "created difficulty for the oil market" by imposing sanctions on Venezuela and Iran, Zanganeh asserted, leading to lower production and higher prices. Related: OPEC’s ‘Modest’ Aims Won’t Be Enough

"And now he expects OPEC to change something for better prices," he said. "That is not fair. OPEC is an independent organization, not an organization to receive instruction from President Trump.... OPEC is not part of the Department of Energy of the United States," he said.

Premium crude prices have surged nearly 75 percent to almost $80 a barrel since OPEC and allies such as Russia, Kazakhstan, and Mexico agreed to a production cut in late 2016.

OPEC is due to meet on June 22 to review the agreement and plans to meet the next day with Russia and other non-OPEC producers that joined the agreement in 2016.

Zanganeh had said he would leave Vienna before talks with Russia and other non-OPEC countries were held, but participants said on June 20 that efforts were taking place to persuade Iran to participate in any deal.

OPEC Secretary-General Mohammad Barkindo said on June 20 he was confident there would be a deal during the June 22 discussions.

Iraq's oil chief, Jabar al-Luaibi, said he hoped there would be agreement when OPEC met, but added that the "oil market has not reached the level of stabilization."

Iran's opposition to raising oil output puts it on a collision course with Russia, which has called for raising production by 1.5 million barrels a day, in a near-total rollback of the 2016 production cuts.

Russian Energy Minister Aleksandr Novak said the need for increased output is urgent during the summer, when demand for gasoline and oil hits a high point for the year. Related: Goldman: Expect Another Bull Run In Oil

"Oil demand usually grows at the steepest pace in the third quarter.... We could face a deficit if we don't take measures," Novak said on June 19. "In our view, this could lead to market overheating" -- meaning sharply higher prices.

Novak said that if OPEC and its allies decide this week to raise output, they could review their decision and fine-tune it at another planned meeting in September.

Saudi Arabia, a close ally of the United States, is particularly under pressure from Trump to offset any production decline caused by the reimposition of U.S. sanctions on Iran in November.

Russia and others have also warned that continuing to limit supply could encourage increased production from shale oil producers in the United States, who are not part of the OPEC agreement and pose outside competition.

By RFE/RL

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