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Iran, Venezuela lock step on oil market woes

Venezuela's oil minister warned of sub-$30 oil without some form of reaction at OPEC.

By
Daniel J. Graeber
Iranian President Hassan Rouhani says his country is keen on ensuring oil market stability by cooperating with Venezuela. File Photo by John Angelillo/UPI
Iranian President Hassan Rouhani says his country is keen on ensuring oil market stability by cooperating with Venezuela. File Photo by John Angelillo/UPI | License Photo

TEHRAN, Nov. 23 (UPI) -- Iranian President Hassan Rouhani told visiting officials from Venezuela it was incumbent upon producers to improve the situation in the global energy market.

"The Islamic Republic of Iran and Venezuela are friends and will do their utmost in favor of their nations' economic development and welfare," the Iranian president told visiting Venezuelan President Nicolas Maduro.

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Iran is eyeing a return to the global energy stage as sanctions pressures ease in the wake of a July nuclear agreement reached between Tehran, the five permanent members of the U.N. Security Council and Germany.

By the end of the year, Iran is expected to start up dozens of oil and gas projects, worth an estimated $185 billion. Production from Iran is already rising, holding steady at around 2.85 million barrels per day from the 2013 average of 2.67 million bpd.

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Iran's return comes at a time when an excess of oil on the market is keeping crude oil prices suppressed. Oil prices started moving lower in late 2014 when Saudi Arabia, the de facto leader of the Organization of Petroleum Exporting Countries – of which Iran and Venezuela are members – said production needed to remain steady in anticipation of future demand growth.

Some market watchers interpreted Riyadh's move as an effort to price rival U.S. oil production out the market. The move, however, may hurt weaker economies within the 12-member production group.

The Central Bank of Venezuela blamed last year's collapse in oil prices for a drop in gross domestic product. Speaking from Tehran, Venezuelan Oil Minister Eulogio Del Pino said oil could drop below $30 per barrel without some coordinated action from OPEC members.

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"We cannot allow that the market continue controlling the price," he was quoted by Bloomberg News as saying. "The principles of OPEC were to act on the price of the crude oil, and we need to go back to the principles of OPEC."

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