Al-Khobar, Asharq Al-Awsat—Iran will not be reducing its oil prices in order to match its competitors on the global market, Iran’s oil minister said on Tuesday, amid fears that discounts offered by Saudi Arabia to US and Asian customers in November could trigger a price war among OPEC members.
“There is no oil price war in the [crude] market,” Iranian Minister of Petroleum Bijan Namdar Zanganeh told reporters on Tuesday, in comments carried by state-owned Iranian news channel Press TV. He added that Iran’s state-owned oil company, the National Iranian Oil Company, was currently setting prices in a “professional” manner.
This comes as Saudi Aramco, the Kingdom’s state-owned oil company, held a discount for US and East Asian buyers of its Arabian Light crude in November, which triggered fears other OPEC members may do the same and further bring down already low prices.
Brent crude dropped below the 100-US-dollar mark per barrel for first time in over a year last month, with the drop continuing on Wednesday to send prices tumbling to 91 dollars per barrel, the first time they have reached this level in more than two years.
However, the price remains above the 90-dollar mark, which most OPEC members identify as the price cut-off point for breaking even. Iran, however, needs prices above 130 dollars per barrel in order to meet its budgetary requirements.
But oil producers remained spooked regarding the health of the market following gloomy recent outlooks on Asian economies. On Monday, the World Bank revised its economic forecast for East Asia and the Pacific region to 6.9 percent in 2014 and 2015, down from 7.2 percent in 2013. It also revised growth expectation for China to 7.4 percent in 2014 and 7.2 percent in 2015, leading to fears over lower demand next year from the world’s biggest net importer of petroleum.
But despite the fears, OPEC has said it will not be lowering its output level of 30 million barrels per day in order to stoke demand and thereby raise prices, deciding instead to postpone any such decisions until all members have met before the end of the year.
A source from OPEC, who spoke on condition of anonymity because he was not authorized to brief the media, told Asharq Al-Awsat he did not expect any of the organization’s members to lower production before its meeting in November, adding that any decisions on output levels would be taken by all members in concert and not unilaterally by any individual members.
The source said current prices were expected given the strength of the dollar and with many refineries undergoing maintenance during the third quarter of the year. He added, however, that OPEC needed to look “seriously” into the issue of supply, especially considering demand was unlikely to pick up in the coming period.
Global oil demand is further expected to fall on the back of lower appetite from China, and from the US following its recent domestic shale oil boom.