NIOC Needs to Maintain Current Output, Exports

Reza Modir, the Oil Ministry's former deputy director for OPEC affairs, made the statement in an interview with ILNA on Tuesday.

According to Modir, this is not the first time Saudis have been told to change their policies, as the same scenario was repeated in 2000 when Bill Richardson, the then US secretary of energy, compelled Riyadh to boost production, which had friendly ties with Tehran then, but the forthcoming OPEC meeting on June 22 will be fractious due to lack of consensus among members. 

The US has reportedly pressured Saudi Arabia, OPEC’s de facto leader, to relax output restraints put in place in 2016 to which Iran, Iraq and Venezuela are opposed, according to Financial Tribune.

"Iran has no commitment to cut its output within the framework of a global pact reached in 2016 to reduce supplies to ease the bloated oil inventories and lift sagging prices," he said.

OPEC's third biggest producer's output stood at 3.8 million barrels per day in May, 2.7 million barrels of which were exported.

"Lower oil prices will be to Saudis' loss as not only do they need petrodollars to reduce their massive budget deficit, but low prices will also have negative effects on Aramco's shares—the world's largest oil company— that is aiming for an IPO in the near future," he said.

Modir noted that the country should adopt new marketing strategies and seek out new customers for its oil in the face of the US reimposition of sanctions after US President Donald Trump's decision to withdraw from Iran's nuclear deal.

NIOC had some spot deliveries to refining complexes like San Vicente in Chile and Spain's Repsol last month.

  Modest Rise

According to informed sources, OPEC is discussing a relatively modest production increase before its meeting in Vienna this week, an attempt to bridge the gap between Russia’s push for a big rise and Iran’s insistence that no change is needed.

While a compromise may be necessary to overcome vocal opposition from Tehran, Baghdad and Caracas, it could mean the resulting supply boost is smaller than oil traders—or indeed Trump—had been anticipating. 

Members of OPEC are discussing an agreement that delivers 300,000 to 600,000 bpd of additional oil supply to global markets over the next few months, according to people briefed on the talks.

 If agreed, that would be smaller than the 1.5 million barrels per day quota increase that Russia has proposed.

“People probably feared 1.5 million barrels a day,” but the current talk indicates a smaller increase, said Torbjorn Kjus, chief oil analyst at Norway's largest financial services group.

The push by some OPEC members to boost production reflects both internal and external pressures. Within the group, Venezuela’s oil output has collapsed to the lowest since the 1950s due to industry mismanagement and Iran’s petroleum exports are expected to suffer from renewed US sanctions.