Saudi Arabia Threatens to Raise Production to Hurt Iran - Oil & Gas 360

Fuente: theiet.org

Bad blood between Saudi Arabia and Iran could threaten to halt yet another OPEC production deal. Reports from Reuters indicate that Saudi Arabia has threatened to increase production even further in an attempt to damage Iran’s oil profits if the Islamic Republic does not agree to cap its production near current levels. This would be the second time that a disagreement between the two regional rivals sunk a wider OPEC production deal.

Tension between the two countries runs deep, but the current standoff between the Iran and Saudi Arabia dates back to the 1979 Iranian Revolution, which removed a Western ally from power in the country, and replaced him with a government Riyadh feels threatens the monarchy. The two softened their positions recently when Saudi Arabia agreed to support a production deal to raise prices.

Working through the details of that deal has sparked renewed problems between the OPEC members, however. At a meeting of OPEC experts last week, sources who were in attendance said Saudi Arabia threatened to use oil prices as a weapon against Iran.

“The Saudis have threatened to raise their production to 11 million barrels per day and even 12 million BOPD, bringing oil prices down, and to withdraw from the meeting,” one OPEC source who attended the meeting told Reuters.

The threat was issued after Iran said it was unwilling to freeze its output, the same position it held the last time OPEC tried to negotiate a production freeze, which ultimately led to the demise of that deal. Iran has argued that it should be exempt from a production freeze until it regains its lost share of the group’s production following the end of international sanctions.

OPEC’s most recent monthly report pegs Iran’s production around 3.67 MMBOPD, but the Islamic Republic reported output at 3.85 MMBOPD in September. Iran has said it will only cap production once it reaches 12.7% of OPEC’s total ceiling – or 4.2 MMBOPD.

The Saudi threat to raise output came as a surprise even to Riyadh’s Gulf OPEC allies, sources who attended the meeting of experts on October 28 said.

One source said the Saudi OPEC delegation has asked to call off the next day’s meeting with non-OPEC producers, including Russia, on October 29 since Iran was objecting to a deal. But they were convinced by other members to attend it in order not to embarrass the group.

“We felt as if they (the Saudis) wanted the meeting to fail,” said a third, non-Iranian OPEC source.

OPEC Secretary General Mohammed Barkindo denied that the Saudis threatened to raise output.

Data released by Platts Friday showed OPEC raised production 300 MBOPD in October. The data was based on a survey of OPEC and oil industry officials, Platts said in a press release. The Platts data came out ahead of OPEC’s official monthly report, which will be released next Friday, November 11.

Read the full report here.