Moscow — The OPEC coalition has "all the tools to balance the market" following the US decision to withdraw from the Iran nuclear deal, Russia's acting energy minister Alexander Novak said Monday.
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Related feature -- Iran Sanctions: Global Energy Implications
"It is too early to say [what the impact of the US decision on the oil market will be]. In any case, we have all the tools that could be used to balance the market," Novak said, commenting on the potential impact of the move on the oil markets.
In early May, President Donald Trump announced the US is withdrawing from the Iran nuclear deal. This is likely to have an immediate impact of about 200,000 b/d of Iranian crude being shut-in, rising to perhaps 500,000 b/d after six months as the deadline nears, most analysts surveyed by S&P Global Platts said. Some of them put the disruption to the market closer to 1 million b/d of crude oil.
Iran is OPEC's third-largest producer with 3.83 million b/d of output in April, according to the latest S&P Global Platts survey released earlier this month. It exports around 2.5 million b/d of crude oil.
US sanctions against Iranian crude customers go back into force November 5 and the US Treasury Department has instructed countries to make significant cuts to their imports over the next six months.
Although most of the other signatory countries to the 2015 nuclear agreement -- the UK, France, Germany, Russia and China -- have said they will uphold the deal with Iran, many multinational companies that do business with Iran are expected to comply with the US sanction regime to avoid any financial penalties.
Novak expects to discuss the issue with Saudi Arabia's energy minister Khalid al-Falih next week, during a meeting on the sidelines of the St Petersburg International Economic Forum.
"We've agreed that we'll meet in St Petersburg and discuss more in detail [the situation around the US decision]," Novak said, referring to his recent phone conversation with Falih, as reported by Russia's Prime news agency.
Novak was cautious about commenting on how the new US sanctions on Iran could impact oil prices.
"Fundamentally, the market is rebalancing, the stocks have been falling and this is a very good result [of the production cut deal by the OPEC coalition]. It is hard to say what share the geopolitical risks take in the price," he said, adding that this issue requires further in-depth analysis.
"We have to monitor whether these prices are long-term and stable. It is impossible to say as of now if they're stable, because geopolitics is drastically influencing the prices," he said. "We'll monitor the situation," he added.
The OPEC coalition's technical monitoring committee is due to meet next week, before the ministers of countries participating in the deal discuss the future of the production cut agreement in late June.
The deal between 14 OPEC and 10 non-OPEC countries to remove 1.8 million b/d of crude oil from the market is effective from January 2017 through 2018 currently. The key initial goal of the deal to remove stock surpluses over the average five-year levels has mainly achieved, according to the deal's participants and many independent market observers.
Nonetheless, the coalition is now discussing new targets, with some proposing that the deal be rolled over into 2019. Broader long-term cooperation between the OPEC and non-OPEC countries is also being discussed.
Oil prices have risen by around 40% since the production cut deal was implemented at the start of 2017, with the US decision to withdraw from the Iran nuclear deal adding further impetus last week, when benchmark Brent exceeded $77/b.