Iran exceeds pre-sanctions level of oil production

Iran exceeds pre-sanctions level of oil production

Iran has increased its oil production to 3.8 million barrels a day, a source in the state-owned National Iranian Oil Co. (NIOC) informs.

According to the International Energy Agency (IEA), before the Western sanctions the volume of oil production in Iran reached 3.5-3.7 million barrels a day, Interfax-Azerbaijan reports with reference to Bloomberg.

Last month the managing director of NIOC Rokdoddin Javadi promised that this June oil production in Iran will reach the pre-sanctions level.

The Iranian authorities have repeatedly stated that Iran would support the agreement on the oil freeze when it returns to pre-sanctions performances. That is why, Tehran decided not to send their representatives to the meeting on April 17 in Doha, because according to Oil Minister Bijan Namdar Zanganeh, the talks were attended by those who wanted to discuss the oil freeze issue. "Iran would not sign such a plan that is why our participation in the meeting was not mandatory," he explained.

The leading analyst of the National Energy Security Foundation Igor Yushkov, speaking to a ‘Vestnik Kavkaza’ expressed doubt that the balance of supply and demand on the global market plays a decisive role today, adding that Iran's policy aimed at increasing the production destabilizes it. "Here we can observe the traders’ psychology. When they see production growth statistics they get scared and begin to sell futures. And this becomes exactly the reason why its value decreases,’’ the expert said.

According to him, the fact that Iran has been increasing the volume of production for quite a long period of time and has gradually increased exports, but the price of oil rose nevertheless from $25 to $47, proves it. "So I do not think that oil prices may fall because of Iran. To some extent the decrease in production in the US compensates the increase in Iran. We can expect the fall in Venezuela, which is on the verge of social upheaval,’’ Yushkov noted.

The analyst also warned that we should not hope that Iran will stop increasing its production. "If oil is in demand Iran will receive additional investments. It fuels Iran's confrontation with Saudi Arabia, because it was Riyadh’s tactic to produce as much as possible, regardless of the price, regardless of the fact that it eliminates inefficient producers. Now Iran uses the same logic,’’ he assumed.

However, the expert warned that Iran's reaching  the planned volumes of oil production is unlikely to help oil-exporting countries to agree on the oil freeze at the next summit in June. 

"At the moment it is unlikely to return to the negotiations on the production freeze, because the negotiations were driven by the hope of reaching a compromise. But when the compromise with the major producers was reached and we were ready to negotiate without Iran, the Saudi Oil Minister told our minister Alexander Novak that the Crown Prince of the Kingdom banned to sign the documents. Nobody is immune from such tricks by Riyadh. We did experience a deficit of trust before too, but now nobody will try to negotiate with each other. If earlier we had problems with Iran that refused to participate in the negotiations, now we have a problem with Saudi Arabia,’’ he explained.

"There is a certain clan in Saudi Arabia that doesn’t want to negotiate. I think that it is unlikely that similar negotiations with so many participants will take place again, because now nobody can be sure that they want be thwarted by one phone call. In addition, there is no longer an urgent to negotiate now: the prices have recovered more or less, and now they are being corrected.