Iran will likely be allowed to maintain its current oil production levels should OPEC decide next month to extend the output cut deal for another six months, Kuwait’s Oil Minister Essam Abdulmohsen Al-Marzouq told Bloomberg in an interview on Wednesday.
In OPEC’s agreement from November, Iran was allowed to slightly raise its production and keep it capped at 3.797 million bpd between January and June, while other fellow OPEC members – except for exempt Libya and Nigeria – all had to cut their respective production.
According to OPEC’s secondary sources, which the cartel considers the legitimate estimates for measuring the production deal, Iran is largely keeping with its pledge, and its output in March stood at 3.790 million bpd.
“I think they will keep the same level if the deal is extended,” said Al-Marzouq, who is chairman of the Joint Ministerial Monitoring Committee (JMMC) supervising the implementation of the cuts that OPEC and 11 non-OPEC nations had agreed to.
“They are not cutting, but they aren’t increasing output from what was agreed on,” Al-Marzouq said, referring to Iran.
Al-Marzouq was one of the first (and loud) voices within the cartel that hinted at an output deal extension beyond June.
Now the Kuwaiti minister told Bloomberg that he expects demand to improve and draw down more inventories in the second half this year.
Meanwhile, OPEC Secretary-General Mohammad Barkindo tried to reassure the markets (again) that the organization is getting closer to re-balancing the oil market. “Our collective action will continue to prove effective,” Barkindo said in a speech, as quoted by Bloomberg.
Analysts, however, are not buying the latest rhetoric coming out of OPEC and Middle Eastern producers, and expect oil prices to continue to be vulnerable, in light of rising U.S. shale production. Related: Oil Prices Edge Lower As Imports Keep Inventories Buoyed
“Looking at the latest price reactions, one might conclude that the only reason for the previous price rise was the expectation of further production cuts on the part of OPEC,” Commerzbank strategist Carsten Fritch told Reuters.
Saudi Arabia’s Energy Minister Khalid Al-Falih reportedly said earlier this week in Riyadh that “it is premature to talk about extending the cut”.
OPEC is meeting on May 25 to discuss a potential extension of the cuts.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- Oil Prices Edge Lower As Imports Keep Inventories Buoyed
- Citi Sees $65 Oil By Christmas
- Why The Permian Doesn’t Keep OPEC Awake At Night