TEHRAN // Iran has warned Opec members that have raised their oil output that they "must bring it under control" if prices fall further, the state's official news agency reported yesterday. Gholamhossein Nozari, the oil minister of Iran, appeared to be referring to countries producing above their Opec production quotas, but did not mention any of the group's 13 members by name, according to the Islamic Republic News Agency.
Saudi Arabia, the world's largest exporter and swing producer, has been consistently pumping above its agreed level to keep the market well supplied while prices have soared. Last month, its output reached 9.7 million barrels per day (bpd), the highest rate since 1981. Responding to repeated pleas from the US and other western oil consuming nations for Opec to open its oil taps, Saudi Arabia raised its crude output by a total of 500,000 bpd in June and July.
The kingdom, which is the only Opec member with significant spare capacity, had already been supplying more than its quota since November last year. According to Opec data, other nations that have exceeded their quotas in recent months include the GCC nations of Kuwait, Qatar and the UAE, and the North African countries of Libya and Algeria. Even Iran, which is Opec's second-biggest oil producer and a price hawk within the organisation, pumped above its quota in five of the past seven months.
But crude prices in the past three weeks have plunged 15 per cent from their record of US$147 reached on July 11. This raised concerns that even a modest oversupply could trigger a severe price slump, following the popping of what Opec has portrayed as a speculative market bubble. Most analysts have linked the recent oil price slide to falling demand for petrol in the US, the weakening global economy - which could slow oil demand growth in emerging Asian markets such as China and India - and recent signs that the US dollar may be gathering strength. Mr Nozari said Opec would discuss "observance of quotas" at its September meeting if the oil price continued to drop, Irna reported. "Opec, as the body responsible for market control, will have to pay increased attention to observance of quotas, and I think Opec will pay special attention to this issue," Mr Nozari said.
"In the event of a continued drop in the price of oil, one of the serious discussions in Opec's coming gathering will be observance of quotas in a way that countries which have raised production must bring it under control," he added. US crude rose US$1.02 (Dh3.74) to settle at $125.10 a barrel on Friday, after Israel warned that Iran was on the verge of a breakthrough in its nuclear programme, stirring concerns of a potential confrontation that could disrupt supply.
But the price is still well below its July peak, as concerns about the health of the economy of the US and other large energy consuming nations continue to drag on sentiment.Last month, Mr Nozari said there would be no need to call for a cut in Opec oil output when the group meets next month, because the winter season of highest demand would be approaching. Last week, Chakib Khelil, the president of Opec, said the price of a barrel of oil could fall by another $50, to between $70 and $80, if the dollar continued to strengthen and geopolitical anxieties eased.
Mr Khelil predicted that Opec members would not readily agree to reduce oil output. "Why should they cut production? They always want to make sure there is good supply and demand, and to satisfy the demand," he said. @Email:tcarlisle@thenational.ae With agencies
