Iran says Opec could cut output

Iran has accused energy consuming nations of biting the hand that fills their petrol tanks, and said Opec could call for oil production cuts next week because of crude's steep decline from record prices. Oil prices have fallen nearly 25 per cent in less than two months to about US$113 a barrel today from a record $147.27 a barrel on July 11. "In view of the drop in oil prices, there is this possibility that Opec would approve an output cut in its upcoming meeting in Vienna," said Mohammad Ali Khatibi, the Iranian Opec governor, to Iran's Mehr news agency. "The supply of oil is more than demand in the market. If Opec is interested in removing the excess oil from the market, it must approve the output cut plan." Mr Khatibi added that big oil consumers were hurting their economic interests by imposing sanctions on producers. "The enforcement of these sanctions will disrupt the production of oil and cause consuming countries to pay more for the oil they buy," he said. Although Mr Khatibi did not mention any names, his comments were an unmistakable reference to the US-led sanctions that Western nations have imposed on Iran over concerns about the country's nuclear programme, especially its refusal to suspend uranium enrichment. Washington and its allies accuse Iran of seeking to develop nuclear weapons, a charge Tehran has consistently denied. Iran, Opec's second-biggest oil exporter and a co-founder of the organisation in 1961, is pumping 4.23 million barrels per day (bpd) of crude, according to Seifollah Jashnaz, the managing director of the National Iranian Oil Company. Although a record for the period since Iran's Islamic revolution in 1979, this falls well short of the country's peak output of 6.1 million bpd in 1974. Analysts have said bureaucratic inefficiency and the unattractive terms Iran offers to foreign investors in its energy sector, as well as international sanctions, were preventing the country from boosting oil production to pre-revolutionary levels. Opec's 13 member nations are due to meet on Sept 9 to discuss, among other things, whether to make any changes to oil production quotas. Most analysts predict the group will leave its output targets unchanged. As a price hawk within the organisation, Iran is growing increasingly isolated. Even Venezuela - which along with Iran consistently spurned calls from consuming countries such as the US for Opec to increase oil output as prices surged - recently said it would ask for production to be held steady as long as oil prices remained above $100 a barrel. Last month, departing from his previous rhetoric, the Venezuelan president Hugo Chavez said it was good that oil prices had fallen from "irrational" levels. He said they should settle near $100 a barrel. On Sunday, the Iranian oil minister Gholamhossein Nozari said $100 a barrel was the minimum oil price Iran would find acceptable. Oil prices in the past few weeks have remained remarkably stable in the face of a series of supply disruptions due to a fire in a major pipeline in Turkey, Russia's subsequent invasion of Georgia, a strategic oil-transit country, and the hreat of damage to US oil installations from a major hurricane. This has led some analysts to suggest they could fall further, once supplies are restored - as they did early on Monday, declining nearly $3 a barrel as the hurricane threat lessened. The main factor driving crude downwards has been falling demand for refined petroleum products in the US and Europe in response to high prices and weakening economic conditions. Recently, there have been signs that the previously robust oil demand growth shown by large Asian economies such as China's could be slowing. For example, stockpiles of jet fuel have been building in the Far East as consumers have cut back on air travel after the Beijing Olympic Games. But if oil prices do resume their previous downwards course, Opec may not have to cut its members' formal oil production quotas to tighten crude supplies. Several Opec countries, most notably Saudi Arabia, have been pumping above their quotas in recent months in response to the earlier calls from oil consumers to increase production. If oil prices do not fall too rapidly, a return to the strict observance of quotas by Opec members could stabilise them. During a visit to Tehran last month, the Opec president Chakib Khelil called for Opec members, except Iraq and Angola, to abide by their quotas. tcarlisle@thenational.ae