Abu Dhabi: A day after Opec (Organisation of Petroleum Exporting Countries) reached a historic deal to limit production at a meeting in Algeria, analysts said that it would he harder for some countries like Iran to curb output as it seeks to increase its market share after sanctions were lifted on the country earlier this year.
The third-largest Opec producer’s output stood at 3.65 million barrels of oil last month, according to Opec data, and that is still short of pre-sanction levels of about 4 million barrels of oil per day.
Edward Bell, a commodity analyst from Emirates NBD said that there is a room for Iran to increase production rather than to decrease it.
“It is a bit harder to believe that Iran is willing to limit its production growth considering the fact it is trying to raise investment in the oil sector and welcome new companies to sign contracts,” he said.
In August this year, Iran announced a new contract model to boost investment in the oil sector. The country wants to lure international companies that can make long-term investments worth billions of dollars and bring in technology after sanctions were eased in January. Italy’s Eni and France oil giant Total have shown interest in developing Iran’s oil and gas fields.
But Iranian officials have been hailing the decision, the first of its kind in a gap of eight years. Its minister of petroleum Bijan Zanganeh calling it as an exceptional decision.
He was quoted by Petroleum ministry’s website Shana as saying, Opec has reached consensus on market management and the level should be divided among the members.
Unanswered questions
Ole Hansen, head of commodity strategy at Saxo Bank, said there will be lot more questions raised in the coming days pertaining to the deal as the entire agreement lacks clarity.
“Several questions were left unanswered especially on who is going to cut given some members including Nigeria, Libya and not least Iran are expected to be excluded?,” he said adding that there will also be questions on who will provide the barrel-for-barrel reduction of the potential increase coming from Nigeria and Libya.
He also said there is no clarity on production whether the group will use independent estimates on production or the individual countries’ own numbers.
The other question about the deal would be whether Russia and other oil producing countries will be on board to implement the deal.
The deal might give a bit of lifeline for the US shale producers to raise production and increase investment, according to Bell.
Prices have rallied after the decision with Brent Brent, the global benchmark rising by more than 5 per cent to touch $49 per barrel on Wednesday as the group came to an understanding to curb output.
However, the trend did not continue with oil prices falling by about 0.66 per cent at around 5:15pm UAE time to $48.37 per barrel as traders sought clarity about the agreement.
