Iran could really shake things up for Saudi Arabia if the nuclear deal passes.
The Islamic Republic “wants to double crude exports soon after sanctions are lifted and is pushing other members of [OPEC] to renew the cartel’s quota system,” a top Iranian official told the Wall Street Journal.
Both of these things aren’t going to make Saudi Arabia too happy: The Kingdom wants to raise its own export number — given the lower oil prices — and has so far been against OPEC production cuts.
Saudi Arabia and OPEC have been pumping record amounts following the oil price plunge over the last year.
Iran’s oil minister expressed similar sentiments to other OPEC ministers at a recent meeting on June 5. Saudi Arabia’s oil minister Ali al-Naimi “brushed off” the proposal, according to the Journal.
OPEC won’t return to quotas unless it’s “absolutely necessary,” al-Naimi added, and the recent price crash wasn’t enough.
Iran’s deputy oil minister for planning and supervision Mansour Moazami told the Journal that oil exports would increase to 2.3 million barrels following the nuclear deal, up from the current number of 1.2 million.
“We are like a pilot on the runway ready to take off. This is how the whole country is right now.”
However, some analysts have expressed doubts over how quickly Iran can increase its production. Dr. Mamdouh G. Salameh, an international oil economist and World Bank consultant, told Gulf News that Iran’s oilfields are old and need huge repairs if the Islamic Republic wants to increase production.
“It will take Iran more than two years to deploy the enhanced oil recovery (EOR) technology to repair the damaged reservoirs in its oilfields and try to increase production,” he said. “Even then it might only succeed in limiting the fast depletion in its oilfields rather than increase production.”
Still, Iran’s potential re-entry in the market comes at a tender time for energy prices. Other analysts believe that Iran’s return might be followed by lower oil prices.
Oil fell by over 45% in the last year. On Monday Brent crude oil fell to $US54.25 per barrel — which is the first time since April it dipped below $US60.
The nuclear deal deadline is in sight — with the official deadline on Tuesday, July 7. (Although the White House needs a deal by June 9.)
But that doesn’t mean that everything is going smoothly.
On Sunday, Secretary of State John Kerry dampened the mood, nothing that although progress has been made, “we are not yet where we need to be on several of the most difficult issues.”
“We’re not going to shave anywhere at the margins in order to get an agreement,” he added. “This is something that the world will analyse, experts everywhere will look at. None of us are going to be content to do something that can’t pass scrutiny.”
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