Baku, Azerbaijan, April 24
By Aygun Badalova - Trend:
The Gulf members of OPEC have so far been adamant that they will not cut production to support prices, despite calls from other members, especially Iran. There is no reason for them to change this stance once Iran resumes higher oil exports, Thomas Pugh, commodities economist at British economic research and consulting company Capital Economics believes.
The recent deal between Iran and the West means that it is now very likely that substantial volumes of oil from Iran will return to the market, according to the economist’s report, obtained by Trend.
“The return of Iranian exports may actually reinforce OPEC’s no output cuts stance, putting even more pressure on US shale producers, especially since the policy is showing signs of working,” Pugh said in a report.
What’s more, Saudi Arabia and its Gulf allies will probably have little sympathy for their regional rival making them even less likely to cut Production, economist believes.
“Nonetheless, the possible return of higher Iranian exports is likely to be heavily discussed at the group’s next meeting on 5th June, Pugh said. There have already been rumours of a return to individual quotas, which were quietly dropped in favour of a target for total production in 2008”.
However, the group is already producing above its 30 million barrel per day (bpd) target. And even when the group did have individual quotas, these were largely seen as a floor rather than a ceiling, according to the economist.
Pugh doubts that Saudi Arabia is going to cut its oil production to make room for Iran.
“Therefore, if and when Iranian oil exports begin to come back to the market they should put significant downward pressure on prices. Indeed, this is one reason why we expect the price of a barrel of Brent to only be $60 by the end of this year,” he said.
OPEC members held a meeting in ministerial level November 27, 2014 to evaluate the global oil market and the falling trend of the oil price. Iran and Venezuela wanted to lower the Cartel's oil output and set a new ceiling level below the current 30 million bpd level.
Tehran and P5+1 (the US, UK, France, Russia, China, and Germany) reached a political framework for the ongoing nuclear talks on April 2.
The sides are to reach a comprehensive deal by July 1, in which Iran would restrict its nuclear program to some extent as demanded by the powers, and in return, the international sanctions on the Islamic Republic’s economy would be lifted.
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