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'PRE-SANCTIONS LEVEL HIT'

Iran oil output stagnates amid Opec bargaining

LONDON, September 9, 2016

Iran's steep oil output growth has stalled in the past three months, new data showed, suggesting Tehran might be struggling to fulfil its plans to raise production to new highs while demanding to be excluded from any Opec deals on supply curbs.

Iran's oil output soared to 3.64 million barrels per day in June from an average of 2.84 million bpd in 2015 following the easing of Western sanctions on Tehran in January, adding to a global crude glut which has slashed oil prices.

But since June, output has stagnated and reached just 3.63 million bpd in August, according to fresh Opec data based on secondary sources, which include consultants and industry media, and seen by Reuters. Iran also told Opec it produced 3.63 million bpd in August, according to an Opec source.

Iran became the main stumbling block to an initiative by Opec and non-Opec Russia earlier this year to freeze output globally. Tehran said it needed to first regain market share lost while it was under sanctions.

Opec's largest producer Saudi Arabia insisted all nations should join and the freeze deal collapsed in April.

As Russia and Saudi Arabia are trying to revive the effort to prop up prices again, Iran has signalled it was more willing to cooperate when Opec and non-Opec producers meet in Algiers on Sept. 26-28. But it stopped short of saying it would join the freeze.

"This (production levels) is a million-dollar question," said a source familiar with Iranian thinking. "The shuttle diplomacy is going on to clear which level is considered an aim for Iran."

BIG BARGAIN

Iran has repeatedly said it needs to reach a level of output of at least 4 million bpd before it agrees to any deal, but one Opec source said on Thursday the latest request from Iran was to set a target as high as 4.2-4.3 million bpd.

The difference between requested levels and current production would amount to over 0.5 million bpd or half a percent of global oil consumption.

And even if Iran were unable to produce it immediately, it would give Tehran an upper hand in dialogue with Opec in the future - if and when Iran manages to bring onboard global oil companies to help it develop its massive oil fields.

Meanwhile, Gulf producers led by Saudi Arabia are insisting that for any deal Opec members should stick to Opec's secondary sources data to put everyone on a level playing field, the source added.

"If we could not do that and accept one system - which is to use secondary sources - it would complicate things further," the source said.

However, it might be a tough task as those figures show Iran has already returned to pre-sanctions output levels, pumping today as much as it was pumping back in late 2011.

That chimes with estimates from the International Energy Agency which believes Iran's production capacity is very close to what it is already producing.

For some in Opec, the issue is settled. Saudi Energy Minister Khalid Al-Falih said on Monday Iran's production has already reached pre-sanctions levels. - Reuters




Tags: Oil | Iran | Opec | freeze |

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