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Petroleum industry

Iran to Raise Oil Production Amid Global Glut, Calls for Emergency OPEC Meeting

Strategic Insights

— 2 min read

Iran has announced plans to boost its oil production "at any cost" to defend its market share, joining calls for an emergency meeting of the Organization of Petroleum Exporting Countries (OPEC) to help prop up crude prices. Iran's oil minister, Bijan Namdar Zanganeh, warned that if the country does not increase its production, it will lose its market share permanently.

Iran has been a major oil producer, ranking second in OPEC before the US-led sanctions were imposed in 2012. With the sanctions now set to be lifted following the nuclear pact with world powers, oil producers such as BP and Royal Dutch Shell are interested in developing Iran's reserves, the world's fourth-largest. Speaking during the first visit by a British foreign secretary to Iran since 2003, Zanganeh said that Shell will pay a debt of $2.3 billion to Iran immediately after the sanctions are lifted.

Key Takeaways:

  • Iran plans to raise its oil production "at any cost" to defend its market share, with Oil Minister Bijan Namdar Zanganeh warning that failure to do so will result in permanent loss of market share.
  • Iran had the second-biggest oil output in OPEC before US-led sanctions were imposed in 2012, with plans to increase production now that sanctions are set to be lifted.
  • Oil producers such as BP and Royal Dutch Shell are interested in developing Iran's reserves, the world's fourth-largest.
  • Shell will pay a debt of $2.3 billion to Iran immediately after the sanctions are lifted.
  • BP was a "good customer" of Iran's crude before the sanctions and is expected to buy Iranian oil in the future.
  • Iran has backed calls for an emergency OPEC meeting to be held earlier than the group's next session on Dec. 4.

Sources:

  • "Iran plans to raise oil output to defend market share, joins calls for emergency OPEC meeting", Bloomberg
  • "Iran, Shell to finalize deal after sanctions lifted", Shana (Iran Oil Ministry's news website)
  • "Algeria asks OPEC to meet to revive oil prices", Reuters (August 21, 2015)

Statistics:

  • Iran pumped 2.85 million barrels a day in July, down from 3.6 million at the end of 2011.
  • OPEC pumped 32.1 million barrels a day of crude in July.
  • Saudi Arabia is set to continue pumping near current levels of about 10 million barrels a day this year and next, Barclays Plc analysts wrote in a report on August 21.
  • Brent crude, the global benchmark, has fallen by about 21 percent this year due to the global glut and increased concern that weakening Chinese growth may mean less oil demand.
  • US benchmark West Texas Intermediate crude fell to less than $40 a barrel for the first time in more than six years in New York trading on Friday.

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