Friday, 20 March 2015

Can Iran influence crude oil price?

One of the conspiracy theories says that the US decision to attain the status of largest oil producing country was aimed at undermining the importance of all other oil producing countries, particularly Russia, Iran and Saudi Arabia. This theory gets some credence because all oil exporting countries have witnessed reduction in revenue and US being the largest energy consumer is benefiting due to nearly 50 percent fall in crude oil prices.

The world is also keenly awaiting talks between super powers and Iran that could lead to easing sanctions on Iran. An agreement has to be arrived at by 31st March this year. Various attempts have been made to sabotage the negotiations, last made by Israeli prime minister. It appears that sanctions will be eased that can pave way for enhanced export of oil from Iran, which would add to the glut.

Bijan Namdar Zangeneh, Iranian oil minister has said that his country would never give up fight for its production quota set by the Organization of the Petroleum Exporting Countries (OPEC). The conviction is evident from his statement, “We keep struggling and we do not retreat even one barrel from our previous quota.” He was reacting to an OPEC directive that its 12 member states are required to produce 30 million barrels per day of oil altogether without any specific quota for each member.

Zangeneh said “OPEC is the only organization in the Third World to have managed to influence world’s economic equations and there is no other such body. We have to wait a little to see why a political will is affecting OPEC. Naturally, oil prices should move forward. Those who pushed the oil price down are more than others under pressure. They have understood their mistake, so has the market and it wants the prices to rise, but a political intention is disturbing the market. If this political intention stops oil prices will edge up.

Iran sold heavy crude oil at $53.26 per barrel in February, a $10.42 rise from $42.84 in January OPEC said in its latest report. The country’s heavy crude oil price came to $47.92 on average during the first two months of 2015, showing $57 fall compared to the same period last year. Reuters quoted Iranian Deputy Foreign Minister Hossein Amir Abdollahian as saying that falling world oil prices will hurt countries across the Middle East unless Saudi Arabia, the world’s biggest crude exporter, takes action to reverse the slump.

There are growing concerns that Iran could become a potential threat to all the oil producing countries. These apprehensions are based on a statement Iranian oil minister that his country has set an output target of 5.7 million barrels per day of crude oil by 2018. Analysts have the reasons to believe his statement because with holding 157 billion barrels of recoverable crude oil reserves, Iran possesses the world’s fourth largest crude oil reserves.

A question arises, why the US is willing to give a chance to Iran to enhance its oil exports? Some cynics say that the US priorities have changed after attaining the status of largest oil producing country. Analysts also apprehend that the US is also willing to accept Iran as a regional super power. If the guns are being moved away from Iran many wonder which country could be the next target?

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