Iran May Moderate Oil Output to Avoid Further Price Slide
Iran could moderate oil output and exports once Western sanctions are lifted to avoid putting prices under further pressure, a senior Iranian oil official said on Tuesday.
Thomson Reuters | Last Updated: January 05, 2016 23:24 (IST) Thomson Reuters
New Delhi: Iran could moderate oil output and exports once Western sanctions are lifted to avoid putting prices under further pressure, a senior Iranian oil official said on Tuesday.
Iranian officials have repeatedly called on OPEC (Organization of Petroleum Exporting Countries) to make room for a supply jump from the Islamic Republic while pledging to ramp up exports as soon as sanctions on its oil industry are lifted in the next few months under a nuclear deal with world powers.
A pledge to moderate exports would be a major shift in Iran's policies in an environment when most OPEC and non-OPEC producers are fighting for market share despite a growing global oil glut.
"We don't want to start a sort of a price war," Mohsen Qamsari, director general for international affairs of the National Iranian Oil Company (NIOC), told Reuters in a telephone interview.
"We will be more subtle in our approach and may gradually increase output," Mr Qamsari said. "I have to say that there is no room to push prices down any further, given the level where they are".
He did not give detail or the scale of how much Iran would be prepared to moderate its shipments.
Iran has repeatedly said it plans to raise oil output by 500,000 barrels per day post-sanctions, and another 500,000 bpd shortly after that, to reclaim its position as OPEC's second-largest producer.
Iran's most senior oil official, oil minister Bijan Zanganeh, said over the weekend Iran would not seek to distort the markets but will make sure it regains its market share.
Global oil prices are trading at about two-thirds below their mid-2014 highs due to a supply glut and waning demand, depriving oil producers of billions of dollars in revenues. Mr Qamsari said he expected oil prices to remain at current levels this year.
To sell additional barrels on the world market, NIOC is looking at buying stakes in existing and new refineries overseas, Mr Qamsari said, without specifying countries or companies.
The strategy is somewhat similar to other Gulf producers like Saudi Arabia and Kuwait although the challenge for Iran would be to raise financing for acquisitions.
Western sanctions against Iran's disputed nuclear programme halved Tehran's oil export to about 1.1-1.2 million bpd and froze its oil revenue in overseas markets.
Mr Qamsari, who last month visited India, said Indian refiners including Reliance Industries are interested in lifting higher volumes from NIOC.
Reliance Industries, which operates the world's biggest refining complex in India, halted imports of Iranian oil in 2010.
He also said Iran would not be offering discounts to lure customers. Currently, Iran offers 90-day credit, free shipping and some discounts on crude prices to buyers in India.
Mr Qamsari said Indian refiners are interested in buying West Karun grade, a blend of oil from 4-5 reservoirs.
Refiners in India, Iran's second biggest oil client after China, owe a little less than $6 billion to Tehran.
Mr Qamsari said Iran wants to recover its dues in foreign currency, preferably euros, although a mechanism has yet to be worked out.
Sanctions have crippled Iran's economy and forced it to resort to gasoline imports. Last year, Iran imported about 5 million litres of high octane gasoline a day to blend with the locally produced fuel.
Tehran has made investments in its refining sector and hopes to halt gasoline imports within a year, Mr Qamsari said.