Iran Opec governor clarifies position on quotas: Update

Adds assessment of scope for increasing production within quotas

Iran's Opec governor Hossein Kazempour-Ardebili said today the current agreement between Opec and non-Opec producers remains valid.

He said, ""if you are asking is there any chance for a new deal — I would say we have a valid deal."

He reiterated comments made by oil minister Bijan Namdar Zanganeh that signatories to the agreement should produce to their quota levels. Currently, over-compliance means that as much as 1mn b/d below the agreed ceiling is being produced, Zanganeh said yesterday, arguing that no further increase in output is required or justified by fundamentals.

But Kazempour clarified the Iranian position, saying that individual countries should meet their individual quotas but not compensate for lost output elsewhere. He said: "Compliance of each and every member can get to its own share. No country can take another's quota at the excuse of full compliance of all. If Libya can have production down by 400,000 b/d, Iran cannot produce 400,000 b/d in its place."

This clarification reinforces Iran's argument that if US sanctions bite on its exports, other countries should not raise their production and take market share lost by Iran. It also realigns Iran with Venezuela, where output is tumbling and which would lose out if the signatories to the Opec, non-Opec agreement resolved to collectively produce at the level implied by the sum of quotas rather than each country producing at but not above its individual quota.

Even though over-compliance leaves agreement signatories well below their implied collective ceiling, the additional number of barrels that could be brought to the market if Kazempour's condition was met is much smaller. Saudi Arabia boosted its production by 160,000 b/d in May relative to April as summer air conditioning demand kicked in. That leaves it only 50,000 b/d below its quota. Kuwait, the UAE and Qatar have a total of some 120,000 b/d in unused quota production available. Iraq has been over-producing. In the non-Opec camp, Russia has little or no headroom and the only other major player — Mexico — is grappling with falling production. Kazakhstan is overproducing as, to a modest extent, is Oman.