Iran Divides OPEC Once Again, Calls for $65 a Barrel Crude
The Islamic Republic of Iran has notified fellow OPEC members that it does not support the relentless rise in crude prices, signaling a sharp split with regional foe Saudi Arabia, whose effort to re-balance the market has driven international crude past $75 a barrel.
“Suitable Price” for Crude
Iran believes that $60 to $65 a barrel constitutes a “suitable price” for oil, according to The Wall Street Journal, which cited an interview with the country’s deputy oil minister on Sunday. Oil Minister Bijan Namdar Zanganeh also stated that his country supports “reasonable” crude values and is not an advocate of ever-increasing price points.
Faced with the possibility of new U.S. sanctions, Iran could lose out on market share if the West decides to limit how much crude it can export beyond its borders. The country is home to the world’s largest proven reserves of natural gas.
“We strongly believe the oil market should not be political,” Zanganeh said, as quoted by WSJ. “Political interference will disrupt the process of development and exchange in the market.”
Iran’s outlook on crude contrasts sharply with the Saudi-led Organization of the Petroleum Exporting Countries (OPEC), which is targeting prices closer to $80 a barrel. Saudi Arabia and Russia have agreed to extend their production cuts until the end of 2018 in an effort to re-balance the global market. Both nations, as well as other OPEC members, have achieved record compliance in light of the agreement.
In April, the cartel and its allies reduced output by 70,000 barrels per day, bringing their collective production levels to 32.12 million barrels. The decline was largely attributed to Venezuela, whose production continues to deteriorate as the country copes with severe supply disruptions. Last month, Venezuela offered India a 30% discount on crude shipments if it pays with the petro, a cryptocurrency backed by the Venezuelan government.
Crude Trades at Multi-Year High
Oil prices rose on Friday amid speculation that the Trump administration would re-impose sanctions on Iran. Brent crude, the international futures contract, closed at $74.87 a barrel on London’s ICE exchange. The contract was last seen trading at $74.95 a barrel, having gained more than 51% over year ago levels.
The West Texas Intermediate (WTI) benchmark for U.S. crude futures ended at $69.72 a barrel Friday, its highest in over three years. It was last seen hovering around $69.79 a barrel.
The relentless rise in crude prices has encouraged the resumption of the U.S. shale boom, which threatens to disrupt the global supply/demand balance. Analysts at J.P. Morgan Chase believe oil prices will gravitate back down to $50 a barrel as U.S. output continues to ramp up.
As Hacked reported in March, at least six U.S. oil producers have reduced their break-even points over the past three years, with the likes of Exxon, Shell, Conoco Phillips, EOG, Chevron, Pioneer and Continental able to maintain market share with prices at or below $40 a barrel.
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