In among the multitude of threats that Iran has made public since the US sanctions on Iran were levied, Iran has now heralded the collapse of OPEC, if OPEC members fill the void by snagging market share left unfilled by Iran and Venezuela, according to S&P Global Platts.
Iran’s oil minister said that two OPEC members were doing just that, accusing them of wielding their oil as a weapon. The two members Zanganeh was referring to were Saudi Arabia and the United Arab Emirates.
It’s interesting to note that both Saudi Arabia has unduly taken on the burden of cutting production. Saudi Arabia has agreed to keep its production to 10.311 million barrels per day, while the UAE’s target is 3.072 million bpd.
Saudi Arabia has been overachieving its share of the production cuts, producing 9.794 million bpd in March. Similarly, the UAE is producing closer to target—but is still under at 3.059 for March.
The “oil weapon”, then, to which Iran is referring, according to S&P Global Platts, is their contact with the United States to come up with a plan to ensure that the oil market is well supplied. Thus far, Saudi Arabia has not increased production to fill any void left by either Iran or Venezuela.
“By using oil as a weapon against two founding members of OPEC [Venezuela and Iran], [they] turn OPEC solidarity into division and draw the death and collapse of OPEC,” Zanganeh said, warning that any country using oil to this end should “accept its consequences.”
Iran and Venezuela have indeed suffered falling oil production as the sanctions on both countries restrict exports and cut out buyers such as India, South Korea, and Cuba who will have to shop elsewhere to obtain sufficient quantities of crude oil.
Venezuela’s oil production fell below 1 million bpd in March at 732,000 bpd, while Iran’s fell to 2.698 million bpd—with more decreases expected as the sanction waivers that eight countries have thus far enjoyed end today. Iran’s 208 average production was 3.553 million bpd, while Venezuela’s averaged 1.354 bpd, according to secondary sources provided by OPEC.
The tough times in which Iran and Venezuela now find themselves may continue to drive a wedge into the oil cartel as other members will naturally respond to market demand as they are able.