PARIS: Opec, which is to set its production policy for the coming months at the end of January, risks being dragged into a conflict pitting Iran against Western oil consuming nations.
The Organisation of Petroleum Exporting Countries, which pumps about 40 per cent of the world’s oil, is due to meet on January 31 in Vienna to decide whether or not it should cut its output in the second quarter, when demand usually eases as warmer weather comes in the northern hemisphere.
However, the decision will not be easy to take with oil prices only two dollars away on Friday from an all-time high of 70 dollars and amid uncertainty about global oil demand, especially from China.
But Opec’s task could be made all the more difficult as tensions between the West and Iran, the cartel’s second biggest producer, heat up over the Islamic republic’s nuclear ambitions.
Tehran has asked Opec to reduce the cartel’s oil production quota by one million barrels per day from April.
“Opec should not postpone the issue of output reduction. Iran has called for carrying out discussions and making decisions for a one million bpd of oil output cut in the second quarter,” Iran’s OPEC representative Hossein Kazempour Ardebili told the semi-official news agency Mehr on Friday.
“If Opec continues its current production, the (current) excess two million bpd of oil supply will lead to an excessive stockpile. This is not affecting oil prices at the moment because the demand is high.”
“But in the second quarter, this heap of (oil) snow will fall down on the oil price as an avalanche,” he added.
The remarks came as Western countries aim to gather support for referring Iran to the UN Security Council for possible sanctions.
The editor of industry journal Arab Oil and Gas, Francis Perrin, said that Iran’s call for an output cut “can be interpreted as a way to send a message to western countries”.
However, he said that Tehran would have no easy job convincing its partners in OPEC, which says it is an apolitical organisation, to go ahead with a production cut.
So far no other Opec country has shown signs of taking the call seriously and Algeria and Venezuela have openly said they were against a cut. Nigeria and Indonesia have also given similar indications, according to the Paris-based International Energy Organisation. Washington has weighed in to urge other Opec member states to make up for any shortfall if Iran stops pumping.
US Energy Secretary Samuel Bodman said that from administration contacts with the major oil producers, “my sense is that we will find that the suppliers will continue to make material available to the markets”.
“They have not given me any specific assurance, but they understand what the demands are, and they understand what the problems for the world economy could be by escalating prices from this point,” he told the CNBC network. “So I think we’ll find that they will do the right thing.”
However, analysts say that the producers are already struggling to meet demand and that it would be difficult to cough up more oil to make up for a shortfall.
