Iran no more sees OPEC as effective organization

Iran sees OPEC as an organization that has lost its control over the oil market, says Fereydoun Barkeshli, the National Iranian Oil Company’s former general manager for OPEC and international affairs.

He made the remarks May 26 responding to Trend’s question regarding Iran’s possible support for the oil freezing plan at the upcoming OPEC meeting, which is scheduled for June 2.

Barkeshli, currently a private energy consultant and president of the Vienna Energy Research Group, said the upcoming 169th OPEC meeting will resemble the meetings held in the 1980s and 1990s.

“At that time [in 80s and 90s] there was the Iran-Iraq war, there was killing of Iranians in Mecca. Ministers [of OPEC countries] were so much at odds with each other that sometimes even inside the conference halls they did not look at each other and had no eye contacts,” he said. “However, even during those bad and difficult days some important decisions were made that helped stabilize the oil market.”

“And now Iran and Saudi Arabia have no political relations or embassies. And there is the killing of some pro-Iranian religious leaders [in Saudi Arabia], and the Yemen war. There are so many geopolitical disturbances, and the oil price and market stability stand in the middle of all this,” Barkeshli explained.

OPEC’s meetings this year for freezing oil output – first between Saudi Arabia, Russia, Venezuela and Qatar and then between nearly all the OPEC and non-OPEC producers – failed because Iran refused to cooperate and discontinue the output boost after removal of oil embargos, says the expert.

He said Iran doesn’t see the output freeze as the business of an organization which is entrusted to regulate and stabilize the oil market.

Barkeshli further noted that for Iran, OPEC began to lose its control over the oil market back in November 2014 when the organization officially abandoned the production ceiling.

“Price band or price target was left to the international market forces even before that. As such, OPEC is now an organization with no production ceiling and no price target,” he said.

“Having said that, the output freeze policy is a positive move towards OPEC’s getting back on its feet again, but provided that major non-OPEC giant, Russia cooperates,” according to Barkeshli.

“OPEC has to put its house in order, needs production ceiling, quota and price level or price band,” he further said, adding the current consensus amongst most OPEC members is around $65 to $75 per barrel and market fundamentals show positive responses.

On the other hand, Barkeshli said, some OPEC producers, such as Venezuela, Nigeria and Angola, have long ago signed barter arrangements with some countries, as for instance with China, India or South Koreas and as such, the low oil prices are in the interests of China and some other South Eastern Asia and eastern European countries.

“This indicates that those countries are trying hard to keep oil prices low, so that they receive more oil for their barter trades,” he added.

“As for Iran, the country doesn’t favor the [output] freeze, though it has no objections if other [OPEC] members opt for that policy,” said Barkeshli.

The Islamic Republic has earlier defied calls from other oil producers to hold its output at the January levels.

Iran says since it suffered a decline from 2.3 million barrels per day of crude export to 1 million barrels per day under sanctions, it is entitled to seek its old quota before considering any freeze.

One of the most important issues in the June 2 Ministerial OPEC Conference is the appointment of a new OPEC Secretary General that will certainly enhance the performance of OPEC Secretariat.

Source: Trend