Iran and Saudi Arabia, two leading members of the Organisation of the Petroleum Exporting Countries (OPEC), could potentially be on a collision course over the ideal level for the price of Brent crude, according to the Wall Street Journal (WSJ).
Iranian Oil Minister Bijan Zanganeh, in a rare interview with the New York based newspaper, said the Islamic republic would prefer to see a price closer to $60 a barrel as this would place more pressure on the burgeoning US tight oil production which is presently threatening the stability of the Brent crude market.
“If the price jumps [to] around $70…it will motivate more production in shale oil in the United States,” Mr. Zanganeh said.
Leading OPEC producer Saudi Arabia wants to see oil prices much closer to $70 a barrel as this would help cover its budgetary commitments through 2018. Iran only needs a price of around $57 to break even.
Yesterday, oil prices dipped closer to $64 a barrel as concerns over US output, which potentially could see the superpower become the world’s number one pumper surpassing present incumbent Russia, outweighed the first decline in the number of active US rigs in more than two months.
Zanganeh told the WSJ that Iran will seek to increase its own output which is presently at 3.8mn barrels per day (bpd), at least 100,000 bpd below capacity. If this oil came on-stream, with the present OPEC and non-OPEC cuts of 1.8mn bpd gradually scaled back from 2019 as has been mooted, prices are likely to fall as inventories fill up.
However, Zanganeh reiterated the effectiveness of OPEC’s decision to reduce output. A production “cut is the only thing that OPEC has to manage the market.”