Iran backtracks (a bit) on plan to ignore Opec quota

March 17, 2017

Apparently embarrassed by its announcements that it would pump crude well above its OPEC ceiling in the coming months, Iran backtracked just a bit Monday by saying it would stick within its OPEC quota in the second half of 2017.

Ali Kardor, the managing director of the National Iranian Oil Co. (NIOC), announced last month that Iran would pump 4.0 million barrels a day by Now Ruz—although Iran’s OPEC quota for the first half of 2017 is 3.797 million barrels a day.

Kardor later said that level would not be reached until next month, but both times he just ignored Iran’s OPEC quota.

OPEC members haven’t said anything publicly about Iran proclaiming proudly that it would violate its OPEC pledge, but have likely let Iran hear their objections privately.  They also probably pointed out that if Iran violates the agreement during the first half of 2017, it will be very hard for them to continue the OPEC cap on output in the second half of 2017.

At any rate, on Monday Iranian Oil Minister Bijan Namdar-Zanganeh said, “If OPEC members stay committed to the agreement [capping output], Iran will produce 3.8 million barrels a day in the second half of the year.”

But he didn’t overturn Kardor’s announced plan to violate the ceiling in the first half of the year.

All of this may be academic, as the bottom has now dropped out of the price of an OPEC barrel.  As the chart on this page shows, the price of an OPEC barrel fell below $50 Friday, the first time it has been below $50 since OPEC pledged major output cuts on November 30.

The main cause of the price drop is that American oil stocks, which had been declining slowly for weeks, jumped last week, suggesting that OPEC has not cut enough from its production to keep prices above $50.