Iran’s maxed-out oil output eases push to extend cuts

Bloomberg

Iran’s oil industry bounced back from sanctions last year, cranking up output to recover market share from other OPEC producers. Now that its surge has topped out, Iran supports an extension of the group’s cuts to preserve those gains.
Oil Minister Bijan Namdar Zanganeh’s willingness to embrace a deal that leaves Iran room to pump about 3.8 million barrels a day signals the country is already producing near capacity, according to analysts from BNP Paribas SA and Energy Aspects Ltd. The Organization of Petroleum Exporting Countries is expected to extend curbs by nine months at a Vienna meeting this week.
“We do not have any problem between six or nine months,” Zanganeh told reporters Wednesday in Tehran, referring to two different scenarios for a possible extension. “We will go along with what the majority agrees with.” He added that “there has been no hint regarding a cutback in production by Iran as of now,” when asked if other OPEC members have requested the country to trim output under a renewed deal.
Oil producers are struggling to shore up markets after a global supply glut sent prices tumbling, with Saudi Arabia and Russia proposing that their 24-nation alliance prolong output limits beyond June and into the first quarter of 2018. Iran insisted on and won an exemption from the cuts that took effect in January and has since pumped just below its cap — unable to produce much more even if it wanted to.
“Iran, knowing that its production capacity is limited anyway over
the next year or so, is happy to
go along with the status quo,’’ Harry Tchilinguirian, a commodities
analyst at BNP Paribas in London, said by phone. “Iran is not the stumbling block.”
OPEC will meet on Thursday in the Austrian capital to consider extending output cuts to clear a global oversupply. It resorted to setting limits last year after benchmark Brent crude plunged to less than half its 2014 high of more than $115 a barrel. Brent has averaged about $54 a barrel since the end of November when OPEC members agreed to quotas.
“The Iranians clearly have big ambitions for their oil industry, but they’ve made slow progress,” said Richard Mallinson, an analyst at Energy Aspects in London. The Persian Gulf country boosted output and exports after international sanctions were eased in January 2016, but its production capacity is stuck at about 3.8 million barrels a day, he said. “Technically, they’re going to struggle to lift crude production above that level until the effect of foreign investment starts to be felt.”