OPEC watching Iran, Russia, unlikely to cut output in June

Tue Mar 1, 2016 5:40am EST
 
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By Rania El Gamal and Dmitry Zhdannikov

DUBAI/LONDON (Reuters) - OPEC is very unlikely to cut output at its next meeting in June, even if prices remain extremely low, according to OPEC sources and delegates, as it will be too early to say how fast Iranian output is rising.

The sources, which include officials from the Middle East, say OPEC countries such as Saudi Arabia also want to test Russia's commitment to freezing output before taking any further steps to stablize prices.

More than 18 months after oil prices began a steep slide due to excess supply, Saudi Arabia, Qatar, Venezuela and non-OPEC Russia agreed last month to freeze output at January levels in the first global oil pact in 15 years.

Saudi Arabian Oil Minister Ali al-Naimi said last week a supply cut was not on the cards although adding that the production freeze was only the first step to balance the market after prices fell to their lowest since 2003.

"Maybe by the end of the year (a cut could be possible) when it is really clear that Iran is actually producing the volumes they are talking about. But not in June," a source from one of OPEC's Middle Eastern producers said.

January was peak or near-peak production for Russia and Saudi Arabia, the world's two top oil exporters, but Iran - OPEC's No.3 producer - is the key supply uncertainty for 2016 as it is raising output after the lifting of Western sanctions in January, adding barrels to the already saturated market.

Over the past month, Iran has issued conflicting statements saying it could add up to 1.5 million barrels per day over the next year which would confound market skepticism that its fields were damaged by years of sanctions.

Meanwhile, its February exports have disappointed as European buyers were cautious to immediately boost trade amid remaining dollar clearance and ship insurance problems.   Continued...

 
The logo of the Organization of the Petroleum Exporting Countries (OPEC) is pictured at its headquarters in Vienna, Austria, August 21, 2015. REUTERS/Heinz-Peter Bader