Iran is taking a firm line with its OPEC counterparts that could threaten the current 24-country crude producer alliance, warning members not to take its market share it risks losing under US sanctions.
* Seeks support over "illegal" US sanctions
* Threatens to exit deal if market share hurt
* Calls for full consensus from OPEC
Oil minister Bijan Zanganeh wants a separate agenda at the next OPEC meeting, in Vienna on June 22-23, to discuss support for sanctions-hit Iran and outlined the case in a letter to OPEC President and UAE Oil Minister Suhail al-Mazrouei.
Zanganeh noted that the agenda should be titled "support by the OPEC ministerial meeting of members who go under illegal, unilateral and extraterritorial sanctions," Iran's Shana news agency reported Thursday.
"If these sanctions lead to lowering the Islamic republic's share from the oil market, after removal of the imposed, illegal restrictions, Iran will return to its normal production level as quick as possible and will not accept any restriction in this regard," the letter stated.
Iran could lose up to 1 million b/d after US sanctions are re-imposed on OPEC's third largest producer from November 5, but many analysts suggest the figure will be a lot lower in the early stages as key buyers begin to wind down positions. Many of the biggest Middle East OPEC producers -- including Saudi Arabia and Iraq -- are direct competitors with Iran and so are likely to be beneficiaries of any reduction in its output. Iran currently has 12% of OPEC's market share based on S&P Global Platts survey data.
This issue has come sharply into focus after Russia energy minister Alexander Novak and his Saudi counterpart Khalid al-Falih indicated to reporters in St Petersburg last week that the two biggest crude producers within the 24-country coalition look set to agree on a plan to release more crude to the market that wiped $3 off the price of oil.
"We've always said that we expect release of supply back into the market will be a gradual process. It's likely that will happen in the second half of this year," Falih said. "If we come to the conclusion that softening is needed, we would say it will be as of the third quarter," Novak chimed in on the same panel in the Russian city.
OPEC and 10 non-OPEC producers, led by Russia, were expected to maintain 1.8 million b/d supply cuts through to the end of 2018. But a faster-than-expected market rebalancing due to a collapse in output in Venezuela and overcompliance to the deal by many other members has brought a review of the deal terms forward. This has led analysts to warn that it might be more difficult to control conformity once the output cut caps are raised. Saudi Arabia, UAE, Kuwait and Russia appear to have the greatest amount of spare capacity and would therefore have the most to gain from any loosening of the quotas.
Moreover, Zanganeh was clearly ruffled by the comments in St. Petersburg and noted that that no country is OPEC's spokesman and said in the letter that the organization's decisions will be made merely with the consent of all members. Zanganeh referenced OPEC's statute that emphasizes support for interests of all its members.
Iran was able to get a special arrangement under the deal struck in late 2016 avoiding having to cut back output due to the fact the country had lost out from the previous sanctions that had been imposed between 2012 and 2016. It agreed to keeping production stable at 3.80 million b/d but in recent months that output has crept just above that threshold.
