Iran closer to accepting a freeze: Qamsari

Iran is now "closer to the idea" of freezing production than it was when Opec ministers last met in June and, with declared production nearing the pre-sanctions level of 4mn b/d, oil minister Bijan Namdar Zanganeh will make a call on whether to do so, said state-owned NIOC's international head Mohsen Qamsari.

Qamsari also said that a freeze would have a market impact because it would squeeze supplies of medium sour crude.

Speaking to Argus , he said: "We have to leave the decision to the oil minister ... But generally speaking I have to say we are closer to the idea [of freezing] in comparison to the previous meeting of Opec. As I mentioned, we are close to 4mn b/d, which is very close to the level of production before sanctions."

He earlier told Argus Crude Forum current output is 3.8mn b/d and 4mn b/d will be achieved in around two months.

In an interview, he indicated satisfaction with the rebuilding of oil export volumes since US and EU sanctions were lifted in January, saying "we have no problem". August crude exports ran at over 2.2mn b/d with condensate approaching 600,000 b/d, he said. Winning back export market share that Iran says was assumed largely by Saudi Arabia while sanctions were in place in 2012-2016, has been a key precondition of Iran to considering participating in any production constraint. This was why the country said it would not sign up to an agreement that was to be signed in April this year between a number of Opec and non-Opec producers, the reason Saudi Arabia gave for its own last minute withdrawal from the deal.

Qamsari said the atmosphere in Algiers at the end of this month when Opec ministers meet informally on the fringes of the International Energy Forum conference will be better than recently"and I believe the ideas of different ministers have moved closer ... so, I am hopeful of some result."

But the official would not be drawn on whether that result was likely to be a freeze agreement. He said: "I am saying that the atmosphere is in favour of having a common decision, and what this decision will be, I do not know."

With a market oversupply of some 2mn-3mn b/d and most Opec countries producing close to capacity or, in the case of Libya and Nigeria, at the highest level they can given their security situation, a freeze at around current levels would, on the face of it, do little to rebalance supply and demand. But Qamsari said a freeze would cause market disruption in the fourth quarter.

"If they decide to freeze and if they perform this decision, definitely the market is going to be facing some difficulties. Do not forget when we are looking to the market globally, we are talking about all types of grades. Opec producers are producing mainly medium sour. Right now, for medium sour there are some shortages. On the very heavy and the lighter grades there is oversupply. When we say the market is facing almost 2mn-3mn b/d oversupply, mainly that oversupply belongs to lighter grade and heavier grade. For medium grade, still there is some shortage… if Opec decides to freeze, it means this medium sour grade is going to be short."

At a strategic level, Qamsari downplayed Opec's importance at present. He said its market share has shrunk to the extent that it can no longer control the market. But, looking ahead, he said Opec's Mideast Gulf producers could win back influence for the group: "The only important role of Opec is the capability for increasing production and the low cost of Opec production. Very easily in Iran, in Saudi Arabia, and in Iraq with less than $10/bl you can increase the production, while this is not feasible anywhere else."

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