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Honor ceiling, Iran tells OPEC

Over-producers will face deep economic pressure if glut continues, Iran says.

By Daniel J. Graeber
OPEC members, notably Iran, are ignoring production agreements to the detriment of oil prices, Iran's Oil Ministry says. File photo by Maryam Rahmanian/UPI | <a href="/News_Photos/lp/be20f5d03ce3d501f62858ee6472cbd3/" target="_blank">License Photo</a>
OPEC members, notably Iran, are ignoring production agreements to the detriment of oil prices, Iran's Oil Ministry says. File photo by Maryam Rahmanian/UPI | License Photo

TEHRAN, Sept. 10 (UPI) -- The Organization of Petroleum Exporting Countries will have to review production levels to make room for Iran or face consequences, Iran's Oil Ministry said.

An opinion piece published by SHANA, the Oil Ministry's official news website, said crude oil markets are skewed toward the supply side by 2 million barrels. Once all sanctions pressures ease, Iran could add another 1 million barrels of oil per day to the global marketplace almost immediately, it said.

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Iranian Oil Minister Bijan Zangeneh said his country could become the second-largest producer in the Organization of Petroleum Exporting Countries, after Saudi Arabia, within seven or eight months of sanctions relief. The minister said Iran will increase net oil production by more than 1.5 million bpd, bringing total production for the Islamic republic to just over 4 million bpd by the end of next year.

SHANA singled out de facto OPEC leader Saudi Arabia for disregarding a production ceiling by exporting 1.5 million bpd more than the market needs. That, it said, adds to the glut of oil that emerged from U.S. shale deposits in 2014.

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"In effect, if shale oil supplies caused prices to fall from above $100 per barrel in 2014 to below that level, Saudi Arabia and other over-suppliers must be blamed for the fall of prices to below $50 in 2015," it said.

Zangeneh said Iran's economy has been able to navigate through sanctions and low oil prices therefore are not a major concern. Without a production ceiling, SHANA notes, crude oil prices will nevertheless move lower

"If OPEC members fail to consider their export ceiling of 30 million bpd, the price of both unconventional and conventional oil supplies will drop dramatically, putting unprecedented pressure on major suppliers whose economies are deeply dependent on petrodollars," it said.

U.S. advocates for erasing a ban on domestic crude oil exports said overseas allies need a reliable source of crude oil. Oil from U.S. shale basins could act to contain Iran's economic ambitions, they said. Members of the House of Representatives vote on a measure easing the ban later this week.

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