Vienna, Austria – The Organisation of Petroleum Exporting Countries (OPEC) welcomed back Iran and agreed to renew for the first half of 2014 a collective oil production cap of 30 million barrels a day thus maintaining the status quo.
The 12-member Organization of the Petroleum Exporting Countries is enjoying oil prices at $112 a barrel for Brent crude, comfortably above its preferred price of $100 a barrel.
Production will not be increased to allow Iran to regain its former quota and second producer position, currently held by Iraq. The agreement caused a dollar-a-barrel fall in the price of Brent crude.
“I’m sure that all OPEC members show wisdom and when member countries, after limitation, return to the market they understand (that) they should open the doors for him and not fight with him,” said Iranian Oil Minister Bijan Namdar Zangeneh.
Since early 2012, when tougher sanctions on Iran first started to take their toll, output from the country’s fields has dropped to about 1m b/d, down from 2.5m b/d, which is equal to the loss of about $80bn in income.
So OPEC faces production surges from two of its members, plus fields coming on-stream in the USA as fracking production rises. How to keep prices high with so much extra capacity?
Iran has already tried to get OPEC quotas changed in its favour, restoring market share taken by Iraq, and an increasing number of OPEC members are wondering if their low production costs means they could sell more if the price was lower.