Iran-Saudi row threatens any OPEC deal, puts role in question

Wed May 25, 2016 9:52am EDT
 
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By Alex Lawler and Rania El Gamal

LONDON/DUBAI (Reuters) - OPEC's thorniest dilemma of the past year - at least from a purely oil standpoint - is about to disappear.

Less than six months after the lifting of Western sanctions, Iran is close to regaining normal oil export volumes, adding extra barrels to the market in an unexpectedly smooth way and helped by supply disruptions from Canada to Nigeria.

But the development will do little to repair dialogue, let alone help clinch a production deal, when OPEC meets next week amid rising political tensions between arch-rivals Iran and oil superpower Saudi Arabia, OPEC sources and delegates say.

Earlier this year, Tehran refused to join an initiative to boost prices by freezing output but signaled it would be part of a future effort once its production had recovered sufficiently. OPEC has no supply limit, having at its last meeting in December scrapped its production target.

According to International Energy Agency (IEA) figures, Iran's output has reached levels seen before the imposition of sanctions over its nuclear program. Tehran says it is not yet there.

But while Iran may be more willing now to talk, an increase in oil prices has reduced the urgency of propping up the market, OPEC delegates say. Oil has risen toward a more producer-friendly $50 from a 12-year low near $27 in January.

"I don't think OPEC will decide anything," a delegate from a major Middle East producer said. "The market is recovering because of supply disruptions and demand recovery."

A senior OPEC delegate, asked whether the group would make any changes to output policy at its June 2 meeting, said: “Nothing. The freeze is finished.”   Continued...

 
A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Gulf July 25, 2005. REUTERS/Raheb Homavandi/File Photo