Iran claims OPEC deal is a big victory

IRAN claimed victory after it was spared any of the cuts in oil production accepted by other OPEC members, including its bitter regional rival Saudi Arabia, to tackle a global glut.

“Iran’s oil victory at OPEC” and “Failure of Riyadh’s oil diplomacy” were among the headlines in Iranian newspapers yesterday morning, a day after the 14-member cartel agreed to reduce its output by 1.2 million barrels per day.

Iran, Libya and Nigeria were exempted from the cuts, with Tehran even managing to win the right to increase its production by 90,000 bpd over the next six months.

The other members of the Organization of Petroleum Exporting Countries agreed that Iran should be allowed to return to its 2005 production levels of 3.975 million bpd – before international sanctions crippled its industry.

Meanwhile, Saudi Arabia, OPEC’s most powerful member, agreed at the Vienna meeting to cut 500,000 bpd from its output.

Iran’s Oil Minister Bijan Zanganeh put a diplomatic spin on the fraught negotiation process.

“The lesson to take is that it is possible to cooperate and reach an agreement despite competition and the existence of very strong political differences,” he said.

Shiite Iran and Sunni-dominated Saudi Arabia are locked in a series of brutal proxy conflicts across the Middle East that have taken on increasingly sectarian overtones, and have had no diplomatic ties since January.

The Saudis may have had little choice but to accept the deal, despite Iran’s refusal to cut production.

Riyadh’s finances have been ravaged by the collapse in oil prices, which fell from more than $100 a barrel in 2014 to near 13-year lows below $30 in February this year.

In August, it was forced to tap international bond markets, having seen $170 billion wiped off its reserves and facing a budget shortfall of around $87 billion this year.

The Saudis had kept oil production high despite the falling prices, partly in the hope that low margins would force fast-growing but less-competitive shale producers in the United States out of business.

That tactic was already putting a strain on Riyadh’s relationship with Washington, its most vital military ally, and looked increasingly untenable in the face of an incoming president, Donald Trump, who has vowed to prioritise shale energy production and questioned the relationship with the Saudis.

The cut is only small compared with the current high levels of production in Saudi Arabia, a source said.