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 Talks in Tehran between Iranian oil minister Bijan Zanganeh and his
counterparts from Iraq, Qatar and Venezuela began on Wednesday. Iran
is the major obstacle to the first joint OPEC and non-OPEC deal
since 2001, having pledged to increase output sharply to regain
market share lost during years of sanctions.
The meeting in the Iranian capital followed a deal reached on
Tuesday by OPEC power Saudi Arabia and non-OPEC Russia, the world's
top two producers and exporters, to freeze production at January
levels if other big oil nations agree to join.
OPEC Gulf producers - Qatar, Kuwait and the UAE - as well as
Venezuela said they would join the pact, aimed at tackling a growing
oversupply and helping prices recover from their lowest in over a
decade.
"Asking Iran to freeze its oil production level is illogical ...
when Iran was under sanctions, some countries raised their output
and they caused the drop in oil prices." Iran's OPEC envoy, Mehdi
Asali, was quoted as saying by the Shargh daily newspaper on
Wednesday.
"How can they expect Iran to cooperate now and pay the price?" he
said. "We have repeatedly said that Iran will increase its crude
output until reaching the pre-sanctions production level."
The freeze plan has so far failed to push up oil prices, due to
concerns Iran would not participate and that a deal would do little
to ease the global glut as it would still allow Russia and Saudi
Arabia to keep pumping at near record levels.
Venezuelan Oil Minister Eulogio Del Pino, Iraqi Oil Minister Adel
Abdel Mahdi and Qatari Energy Minister Mohammad bin Saleh al-Sada
sat down with Zanganeh at 3 p.m. (1130 GMT).
The sanctions, imposed over Iran's nuclear programme, were lifted
last month after an agreement with world powers, allowing Tehran to
resume selling oil freely in international markets.
Iran exported around 2.5 million barrels per day (bpd) of crude
before 2012, but sanctions cut that to around 1.1 million bpd.
Tehran has pledged to raise supply by around 1 million bpd in the
next 6-12 months.
SPECIAL TERMS
This would only add to the global glut, which has been fuelled by
U.S. shale output and a decision by Saudi Arabia to pump at full
capacity to drive higher-cost producers out of the market.
The world is already producing more than 1 million bpd than it
consumes, with oil stockpiles at record levels.
As a result, prices fell below $30 per barrel in January from as
high as $115 in mid-2014, hammering the finances of Russia, Saudi
Arabia and other producers.
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Brent oil futures rose 3 percent on Wednesday after losing as much
as 4 percent the day before.
"A freeze is not the same as a cut, and somewhat disingenuously,
keeping crude production at January levels actually implies
higher-than-expected annual output ... and so can hardly tackle the
current market oversupply," JBC Energy said in a note.
Two non-Iranian sources close to the OPEC discussions told Reuters
on Tuesday that Iran might be offered special terms as part of an
output freeze deal. "Iran is returning to the market and needs to be
given a special chance, but it also needs to make some
calculations," said one source.
The sources did not elaborate on the special terms, which could be
anything from setting limited production increases to linking future
output rises to a recovery in oil prices.
But Tehran-based oil analyst Reza Zandi said it would be difficult
to persuade Tehran to agree to any restraints as there was a broad
consensus among senior Iranian officials to increase production to
pre-sanctions levels.
"Freezing the output is against Iran's national and economic
interests, Zanganeh cannot accept it," he said. "The establishment
has decided so."
Olivier Jakob from Petromatrix consultancy said that if Saudi Arabia
were to freeze output at January levels, the kingdom would need to
cut exports by 0.5 million bpd in the summer months, when it burns
more oil for power generation at home.
"The production freeze can therefore be seen as an un-official way
for Saudi Arabia to make some room for the restart of the Iranian
exports," he said.
The last global deal in 2001 saw Saudi Arabia persuade Mexico,
Norway and Russia to contribute to production cuts, although Moscow
did not follow through and raised exports instead.
(Writing by Andrew Torchia and Dmitry Zhdannikov; Editing by David
Holmes, Pravin Char, Janet McBride)
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