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Iran rejects spat with Russia over Saudi oil push

A senior Iranian oil official has played down differences with Russia over a Saudi-led push to raise crude oil production which has prompted Tehran to warn against breaching OPEC’s current output limits.

Non-OPEC Russia and OPEC members reportedly agreed last month to raise output by around 1 million barrels per day (bpd) from July. Saudi and Russian energy ministers spoke Monday, and reiterated the terms of the agreement.

“For economic and political reasons, we have to stand with Russia; we cannot criticize it so much. Of course, it should be noted that Iran has little problem with Russia in the global oil markets,” Iran’s OPEC governor Hossein Kazempour Ardebili said Tuesday.

Russia, he said, had taken heavy borrowings and loans over the past five years to raise its output to around 11 million bpd.

“The deadline for the repayment of the Russian oil debt is now approaching, and the country has to increase its production,” Kazempour said during a meeting with reporters in Tehran.

“Of course, the increase in Russian production is not too big and can be as much as 200,000 barrels,” he added.

Iran’s OPEC governor Hossein Kazempour Ardebili

US pressure on Saudi Arabia

US President Donald Trump said Saturday that Saudi Arabia had agreed to increase oil production by up to 2 million bpd to moderate high prices.

The kingdom is under the US pressure to ramp up oil production quickly to make up loss of Iranian barrels which the Trump administration has threatened to bring down to zero.

Iran’s President Hassan Rouhani said on Tuesday, “The words of some US officials that they want to bring Iran’s oil exports to zero are an exaggeration because they will never be able to fulfill it.”

“In my opinion, the assumption that one day all the oil producing countries would export their surplus oil and Iran would be the only country unable to export its oil is false and unwise” he told a joint news conference with Swiss President Alain Berset in Bern.

Trump wants to make sure that higher gasoline prices as a result of his Iran decision would not hurt Republicans at the upcoming polls.

Abrupt output hike ‘just noise’

Saudi Arabia has acknowledged a call between King Salman and Trump but not mentioned any production targets. Oil market experts, nevertheless, have dismissed an abrupt increase in oil production.

“This incident with the Saudis and the US administration is just noise,” US broadcaster CNBC quoted Beat Wittmann, a partner at financial consultancy Porta Advisors, as saying Monday.

“You cannot order 2 million barrels like ordering a coffee somewhere,” he added.

Trump has repeatedly sought to blame surging oil prices on OPEC which has cut its output for the last 18 months to shrink a global glut of oil.

However, it was his decision to leave the 2015 landmark nuclear deal with Iran and impose the strongest sanctions in history on the country that caused oil prices to rise to record highs since late 2014.

The State Department said Monday the US remained determined to cut Iran’s oil exports to zero, despite resistance from importing countries.

The department’s director of policy and planning Brian Hook, however, appeared to be softening on earlier demand that countries like China, India and Turkey end all imports of Iranian oil by Nov. 4 when US secondary sanctions would “snap back” for oil and banking transactions.

“We are prepared to work with countries that are reducing their imports on a case-by-case basis,” he said.

Hook, nevertheless, stressed that the US was “not looking to grant licenses or waivers” which major Iran clients are demanding from Washington.

Rouhani’s warning 

Rouhan, currently on a visit to Europe to discuss the future of the nuclear deal, warned that any threat to Iran’s crude oil exports would threaten the rest of the Mideast.

“It seems they do not understand what they are saying when they say Iran will not be allowed to export even a single drop of oil,” Rouhani told Iranian expatriates in Switzerland Monday night.

“All right, if you can do such a thing, do it and see the result!” he said without elaboration.

President Rouhani (2nd L) talks to Iranian expatriates in Bern, Switzerland, July 2, 2018. (Photo by IRNA)

Rouhani said the main goal of the United States by imposing sanctions is to put pressure on people, but they claim that they want to put pressure on the Iranian government.

“But when they apply sanctions on people’s basic needs like medicine, who will be put under pressure?” he asked.

His warning came as the United Arab Emirates said on Tuesday it could increase its own production, in an apparent gesture to please the US and ease up pressure on its close ally Saudi Arabia.

The UAE hosts some 5,000 US troops, with Dubai being the US Navy’s busiest port of call abroad.

Iranian Minister of Petroleum Bijan Zangeneh wrote to OPEC president Suhail al-Mazrouei on Saturday to warn against any unilateral measure to boost oil output above OPEC’s current limits.

“An issue that compels me to write to Your Excellency is that we have not arrived at any decision to assign any allocated production level of any member to others,” he said.

The Iranian oil minister called on members not to ”provoke the US to take actions against Iran” which could lead to further rise in oil prices.

PVM Oil Associates strategist Tamas Varga said, “We are entering the second half of the year with a huge amount of uncertainty surrounding the supply side of the equation.”

“Depending on your belief you could just as easily bet on $100 as $60 by the end of the year,” he said in a research note published Monday.

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