A senior Iranian energy official says he expects oil prices to rise to $80 per barrel late next year even if OPEC doesn’t cut production during its impending meeting.
At its last meeting in November, OPEC decided not to cut production in the face of an oil glut and lower prices, caused in large part by producers of oil from US shale, opting instead to keep combined output at 30 million barrels per day in a price war to reclaim market share. Related: $50 Billion Mega Project Could Change South America Forever
On May 18, on the sidelines of an energy conference in Kuala Lumpur, Iranian Deputy Oil Minister Rokneddin Javadi was asked if the cartel would change course at its June 5 meeting, now that US production has declined. “I don’t think so,” he replied.
Before OPEC’s November meeting, members such as Iran, Iraq and Venezuela, which were feeling financial pressure from the glut, had urged the cartel to cut production. But Saudi Arabia, OPEC’s most influential member, persuaded the group to maintain production, abandoning its role as a “swing producer,” which occasionally reduced oil output to support prices.
Javadi, who is also managing director of state-run National Iranian Oil Co., suggested that not all members of the cartel were happy with the decision, saying there have been “different ideas” on how OPEC should have responded, and that his government probably will press for a reduction, which he said, would “reinforce cooperation” among the group’s members.
Whatever OPEC decides, though, Javadi said he is convinced that the average global price of oil will rise to $80 per barrel by the end of next year. It was over $110 per barrel in June 2014 but lost more than half its value by the end of the year, and now hovers a little over $65 per barrel.
“From a commercial point of view, today’s prices should be sustained and increase gradually,” he said, “but it depends on the political situation and what’s going on in the Middle East and Arabian countries.” Related: “Bigger Than The Bakken: Energy Companies Setting Their Sights On Argentina”
This isn’t the first time Javadi has forecast a rise in the price of oil. On May 7 he said in Tehran that the current price is “not sustainable” and will rise because of slowing US production. “Based on trends and information we have …, our expectation is that by the end of 2015 we can see this figure of $80,” he said.
In Kuala Lumpur on May 18, Javadi also spoke of his expectations about the possibility, if not the likelihood, that Western sanctions imposed on Iran because of its nuclear program will be lifted soon. “We hope we can come back to the export levels that we had before the sanctions,” he said.
Since 2012, Iran’s exports have been reduced to about 1 million barrels per day, less than half the approximately 2.5 million barrels per day it exported before the sanctions. Javadi said his country would work hard to regain the market share it lost to other oil producers in Europe and Asia. Related: This Innovation Will Help U.S. Companies Win The Oil Price War
“It depends on market situation and price level, but we will come back to the traditional trade that we had before,” Javadi said. If and when the sanctions are lifted, he said, Tehran will negotiate with other OPEC members about trimming their production to make room for Iran’s return to full production.
By Andy Tully of Oilprice.com
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