Iran’s opposition to grouping unlikely to win support
Iran will not effect much change during Opec’s sub-committee meeting in the Algerian capital this week, even as it threatens to veto any decision that opposes its national interests, analysts said.
“Unfortunately for Iran, this is as good as a done deal, because the Saudis and the Russians have agreed to do things this way,” said Vandana Hari, an analyst at energy consultancy Vanda Insight in Singapore.
Last week, Iranian oil minister Bijan Zanganeh said Iran would veto any decision by Opec and its allies that could threaten its ability to get oil to market at a time when its output is being increasingly restricted by US sanctions.
Opec’s sub-committee is expected to discuss output quotas in Algeria today, a decision Iran has termed “illegal”.
Last week, Opec secretary general Mohammed Barkindo said in Fujairah that the organisation was looking to ease the concerns of all its producers.
However, analysts suggest Iran’s clout may be far eclipsed by the growing proximity between Saudi Arabia and Russia, two of the world’s largest sovereign producers.
“Iran is neither Opec president at the moment, which is the UAE, nor the joint JMMC [joint ministerial monitoring committee] president which is Saudi Arabia and Russia,” said Iman Nasseri, managing director for the Middle East at Facts Global Energy in London.
“No one has significant clout except Saudi. They have the largest spare capacity and largest production [capacity]. Whoever produces more has higher say,” he added.
However, Ms Hari suggested that the Saudi-Russian leadership of the grouping may be amenable to extending an olive branch to Iran given its difficulties of getting oil to the market, similar to the flexibility allowed to Tehran during production cuts in 2017.
“They may hold out an olive branch – by not making any changes to Iran’s quota for the time being,” said Ms Hari.
“In any case, the 1 million barrels per day boost agreed in June was to offset the declines from Venezuela, Angola and Mexico.
“It doesn’t eat into Iran’s market share. “Opec+ will have to ratchet up production much beyond that to offset the losses from Iran.”
Both analysts suggested that Iran exiting Opec because of frustrations with the grouping was a strong possibility but a choice it was unlikely to make.
However, Tehran, which had earlier relied on Russian and Venezuelan support to back up its arguments in the group, is increasingly becoming sidelined by the growing Riyadh-Moscow ties.
“There were a few price hawks at the June 22-23 meeting who were not too keen on making any changes in the production restraints in place. But they have been quiet since and are unlikely to support Iran,” said Ms Hari.