Vienna — Iran's oil minister has warned about the lack of spare oil capacity and afurther "jump" in prices after OPEC agreed on Friday to adjust its productionaccord.
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"The market is very tight," Iranian oil minister Bijan Zanganeh told S&PGlobal Platts in an interview late Friday. "There is not much oil in themarket,"
Zanganeh said Friday's deal would effectively release another 500,000 b/d ofcrude onto the market. Other OPEC ministers have estimated the actual "real"increase in supply from Friday's agreement at between 600,000 to 800,000 b/dafter the group of 15 producers failed to provide precise figures in theirfinal communique.
He said the impact would be lower because Saudi Arabia, the United ArabEmirates and Kuwait are already producing close to their allocations under theproduction cut agreement despite being the only members with significant sparecapacity.
"There is no oil. Each year demand goes up by 1.5 million and who has moreoil. Exit of Iran from the oil market will make oil price jump," he said.
Zanganeh had initially objected to any adjustment to OPEC's pact with 10allies led by Russia to cut output by 1.8 million b/d arguing thatnegotiations had been tainted by President Donald Trump's complaints over highprices.
However, his opposition changed after last minute bilateral talks held Fridaymorning with his Saudi Arabian counterpart Khalid al-Falih who said OPEC's newarrangement would effectively increase supply by a "nominal" 1 million b/d.
However, even if producers were to pump above their quotas and violate thedeal, Zanganeh said collective exports would be limited because of surgingsummer demand in the Middle East requiring more barrels for domesticconsumption at power plants in the region.
OPEC meets later Saturday in Vienna with its 10 non-OPEC partners in the dealto finalize the deal. Russia is already exceeding its allocation but haslimited further upside.
Zanganeh also said President Trump was wrong to target Iran's oil as part ofsanctions due to come into force in November against the Islamic Republic."Mr. Trump has two mistakes," Zanganeh said. "One is that he thinks the regimewill change in Iran within months. And the second mistake is that he has beentold there is a huge spare capacity in the world, and he can push Iran out ofthe market. He will soon realize that he is mistaken."
President Trump, who withdrew the US from the Iran nuclear deal in May, haspressured key ally Saudi Arabia to loosen its taps to moderate prices. Somereports have suggested the US requested an extra 1 million b/d of supply,which is the amount of Iranian production some analysts say sanctions couldshut in.
The US president tweeted within an hour of OPEC announcing its deal: "HopeOPEC will increase output substantially. Need to keep prices down!"Zanganeh said OPEC should not be in the business of caving in to US demands,and blamed the sanctions for the recent price rise.
"Generally, my point was that OPEC shouldn't give a positive signal to the USand it didn't," he said. "[Trump] wants to say that he is against high price,but he wants to say high fuel price is not his fault. He wants to say it'sOPEC."
The minister acknowledged that US sanctions, which snap back on November 5,were already being felt in Iran. Shipping companies, banks and insurers werealready shying away from doing business with Tehran, forcing crude buyers tostart looking elsewhere for supplies, he added.
Iran's crude and condensate exports stood at 2.8 million b/d, Zanganeh said.When US sanctions had been previously imposed from 2012 until early 2016,Iran's crude exports had halved to about 1 million b/d.
Analysts have said that Chinese refiners could step into the void left byother buyers spooked by the sanctions, though how much they would be willingto buy and at what prices remains to be seen.
"Europeans have told us they won't take oil from us, like Shell and Total,"Zanganeh said. "My one and only priority is to keep the exports. We do ourbest and use every way."
--Aresu Eqbali, email@example.com