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Iran warns over 'collapse of OPEC' if other producers cover sanctions impact

London — Iran's oil minister on Wednesday criticized neighboring oil producers for conspiring to take advantage of his sanctions-hit country and Venezuela to boost their oil market share, saying they risk the "collapse of OPEC."

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In a speech at an oil conference in Tehran, Bijan Zanganeh said two OPEC members, whom he did not name, were using their oil production as a political weapon.

Asked in a press conference whether the countries he was referring to were Saudi Arabia and the UAE, Zanganeh indicated they were.

The two producers have consulted with the US on how to keep the oil market sufficiently supplied, with the US set to allow sanctions waivers it granted to eight countries to continue purchasing Iranian oil to expire on Thursday.

"By using oil as a weapon against two founding members of OPEC, [they] turn OPEC solidarity into division and draw the death and collapse of OPEC," Zanganeh said. "Anyone who uses oil as a political weapon should accept its consequences."

At OPEC's last meeting in December Iran had threatened to quit the organization over Saudi Arabia's insistence that it participate in production cuts, according to media reports. Iran and several other members blamed Saudi Arabia for flooding the market in the second half of 2018, under pressure from the US to keep oil prices low.

Saudi Arabia eventually relented and granted Iran an exemption from the supply accord, and Zanganeh later denied considering leaving OPEC.

The US reimposed sanctions targeting Iran's oil sector in November and, with the expiry of the waivers, US officials say they aim to bring Iran's oil exports down to zero.

Iran has exported about 1.2 million-1.3 million b/d of crude in recent months.

Zanganeh said Iran would continue to export as much oil as it can, though he did not elaborate on how.

"Zeroing Iran's oil exports is a US dream, but it's a false hope," he said.

At the same time, he said the expiry of the waivers would risk a supply squeeze, given the geopolitical risks that exist in other key oil-producing countries.

"The market situation with incidents that can take place any moment in Libya, Nigeria and other places, and unpredictable but probable fluctuations is very fragile," Zanganeh said.

He also cast doubt on the capacity of other producers to make up for any loss of Iranian supplies.

"Neighboring countries keep trying, with statements and speeches relying on exaggeration of their surplus capacity, to ensure the market that with the exit of Iran from the oil market there will be no problem in the supply," he said. "Any expert of the market knows that this is an exaggeration, not only in their [production] capacity but also in their reserves."

Saudi Arabia, which pumped 9.87 million b/d in March, according to the latest S&P Global Platts OPEC survey, claims production capacity of 12.5 million b/d. The UAE, which produced 3.05 million b/d, says it can pump close to 3.5 million b/d.

Their quotas under the OPEC/non-OPEC supply accord are lower, however, with Saudi Arabia's cap at 10.31 million b/d and the UAE's at 3.07 million b/d.

Saudi Arabia is set to host a meeting of the nine-country OPEC/non-OPEC monitoring committee that it co-chairs with Russia on May 19.

The next OPEC meeting is June 25 in Vienna, with Russia and nine other non-OPEC partners joining talks on June 26.

--Aresu Eqbali, newsdesk@spglobal.com

--Staff, newsdesk@spglobal.com

--Edited by Jonathan Loades-Carter, newsdesk@spglobal.com