iran oil news

Iran has urged the Joint Ministerial Monitoring Committee (JMMC) — the body responsible for overseeing compliance of Opec's output restraint deal with non-Opec partners — to continue reporting conformity levels on a country-by-country basis.

Iran's oil minister Bijan Namdar Zanganeh, in letters to his UAE and Saudi Arabian counterparts, stressed Opec members should maintain efforts to comply with the output deal or risk undermining the integrity and effectiveness of the organisation.

In his letter to UAE energy minister Suhail al-Mazrouei, who is also Opec president, Zanganeh cited Opec's latest Monthly Oil Market Report (MOMR), which showed several members over-producing in June, as "a violation of their commitments undertaken at the 171st meeting of the Opec conference [in November 2016]."

The MOMR, using figures directly supplied to Opec, put Saudi Arabia's production at 10.49mn b/d in June, up by 459,000 b/d from May. This compares with the 10.07mn b/d cap Riyadh pledged in the production restraint deal agreed in late 2016.

"We are concerned that this violation may continue in the remaining implementation months ahead, and in contradiction with the agreement adopted at the 171st and 174th meetings of the Opec conference, and turn [it] into a routine practice," Zanganeh said. "It is essential for the JMMC to monitor the production of member countries from July 2018, which is the first month of implementation of the resolution 174.513, and report country-by-country the extent of their conformity to the Opec conference."

The JMMC is made up of Saudi Arabia, Russia, Kuwait, Venezuela, Algeria and Oman. Opec and 10 non-Opec allies, faced with the prospect of a looming supply crunch, agreed at their latest meeting in Vienna on 23 June to boost production to bring compliance to 100pc, from 147pc in May.

Zanganeh's letter again highlights the significant differences in how Iran, Saudi Arabia and others interpret the decision taken at that meeting. Iran has maintained countries should not be able to make up for lost supply from others to bring overall compliance levels down. Saudi Arabia, the UAE and others have placed the focus on "the group" as a whole.

Zanganeh again made reference to this disparity in his letters, and said the decision "neither warrants member countries the right to exceed their production level above the allocated quota decided at the 171st meeting of the Opec conference, nor the right to redistribute the production cut quote among member countries."

A joint Opec and non-Opec technical committee (JTC), which will meet in Vienna on 18 July, has been tasked by Russia and Saudi Arabia, the two co-chairs of the JMMC, with "developing and recommending a suitable process" to modify the monitoring procedure to better reflect the objectives agreed at the 23 June meeting.

The modifications to be discussed are likely to focus on this shift away from the monitoring of country-by-country compliance, as has been the case thus far, in favor of an overall compliance level. This is in line with both Saudi Arabia's and Russia's interpretation of the 23 June agreement.

Zanganeh in his letter to Saudi Arabia's oil minister Khalid al-Falih said the JMMC "is not authorized to interpret the conference decisions, but its only mission is monitoring and reporting the level of conformity of countries to their production adjustment commitments one by one, as has been practiced so far."

"As far as production and adherence to quotas are concerned, only decisions adopted unanimously at the Opec conference… are valid and shall constitute the basis for action by Opec," he said. "In case the Opec member countries do not fully adhere to their commitments, the effectiveness of this organisation… will be gradually eroded, and the responsibility of this would lay with those member countries violating their commitments."


16 July 2018