Will OPEC allow Iran to increase oil supply?
By Aygun Badalova
Iran, as never before, is close to resolve its problems related to the economic sanctions. Despite the protraction of the talks between the P5+ 1 (the US, UK, Russia, China, France and Germany) and Iran, there are quite real chances for success. One of the results of lifting the sanctions imposed on Iran will be the country’s access to the world energy resources’ market.
Iranian authorities have already expressed readiness to double the oil supply from the current 1.2 million barrels per day to 2.3 million barrels if the sanctions are lifted. The country started to prepare the ground for his several months ago: it said that OPEC member states should make room for Iran to allow it to increase the export.
Currently, Iran calls for returning to the individual quotas for oil production for the OPEC members.
The cartel refused from this attitude in 2011 due to non-compliance with the quotas. Resumption of this practice would be a perfect solution for Iran. However, the question is whether the other OPEC member states will take this step or not.
OPEC has stopped playing the role of a guarantor of stability in the oil market. Currently, under the conditions of fierce competition by other producers, it is important for OPEC member states to preserve their share in the market. The decisions adopted in the last two meetings not to change the set quota for production even under the conditions of decrease in oil prices prove that.
Despite the damage caused by the low prices to some OPEC member states, the overall quota wasn’t reduced. In fact, currently, the oil market has been left on its own, while OPEC watches this from the sidelines and simply hopes for the stabilization of the market without the direct participation of the cartel.
Currently, OPEC’s position on Iran’s request to make room for it within the cartel’s quotas is as following: “it is too early to talk about this”, to be more precisely, “currently, there are no prerequisites for this”. That’s to say, the cartel is not ready to discuss this issue at the time. Meanwhile, there are serious doubts that it will be ready to make some concessions when the time comes.
In the current situation, it is obvious that for the present, none of the OPEC members is going to give up its share of quota to Iran. Therefore, if Iran increases the oil supply, this can lead to a serious competition for the market within the cartel itself.
Currently, OPEC’s quota for oil production is 30 million barrels per day. However, the member states do not comply with this quota. OPEC’s production increased by 50,000 barrels per day and reached 31.33 million barrels in May which is the highest level of production since August 2012, according to the International Energy Agency.
Forecast of the US JP Morgan bank for oil production by OPEC member states (million barrels per day)
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