Vienna decision shows oil cartel's Iran divide: experts

The Organization of Petroleum Exporting Countries surprise decision to not declare its official production quota demonstrates the widening divide among cartel members on Iran’s expected boost in the oil market, experts have told Anadolu Agency.

The oil cartel announced Friday that it was postponing its decision on the production quota until its next meeting in June, and said it will instead continue to produce at its actual level, instead of the official level of 30 million barrels per day.

The actual production level of the cartel varies constantly, since each member's average output differs every month. Most recently, this level was at 31.4mbpd in October, according to OPEC's monthly oil market report published in November.

Since the cartel's last meeting in June, Iran has been demanding the organization to make room in its quota for its return to the oil market after international economic sanctions on the country were lifted. 

"The current indecisive approach of OPEC in Vienna has shown that the oil cartel is not a single block," Cyril Widdershoven, a senior vice president at MEA Risks LLC in the U.S, said.

"Tehran does not want Saudi Arabia to lead the cartel and to decide that Iran is not allowed to increase its production and export volumes in the coming years," he said.

Saudi Arabia, the world's largest oil exporter, is also the cartel's most influential member. In addition, Riyadh is Tehran's biggest political and economic rival in the region, while the Saudi kingdom has been a strong opponent against lifting sanctions on Iran.

"Global economic growth could prevent the conflict to blow up OPEC, if demand is strong enough to give Iran some leeway inside the cartel," Widdershoven said.

"If not, Riyadh and Tehran could end up in a direct confrontation, leading to an undesired open conflict of unknown proportions," he warned.

The cartel’s Secretary-General Abdullah al-Badri said during the Friday press conference in Vienna that OPEC will wait to decide on a quota until Iran's return to the oil market.

"Iran is coming and we don't know when it is coming. We have to accommodate Iran one way or another. So, we decided to postpone this decision to the next OPEC meeting until the picture becomes clearer for us to decide on a number," Al-Badri said.

Iran, which was once the second biggest oil producer in OPEC, has repeatedly stated that it is planning to increase its oil production by 500,000 barrels per day immediately after the sanctions are lifted, and by another 500,000 barrels per day within the following six months.

"Iran is getting ready to come into the market. We need to see what Iran brings to the market. We just feel comfortable to wait and watch around this time," Emmanuel Ibe Kachikwu, Nigerian petroleum minister and OPEC conference president, said Friday.

"At the end of the day, every country has a sovereign right to bring its resources to the market place. OPEC's position is that we are glad to see Iran recovering out of sanctions and back to the market place. And, at an appropriate time, we will review the impact of its entry. Then we will decide on what to do," Kachikwu added.  

Dominic Haywood, a crude oil analyst for the London-based energy market consultancy Energy Aspects, told Anadolu Agency on Friday, that it was indeed hard to set a quota without knowing Iran’s impact.

"It's very hard to set the quota when you don't know how much Iran is going to bring to the market," Haywood said, adding: "How can you set the quota when you don't know how much more one of your key producers will produce and export in the first quarter of 2016."

But before Iran returns to the market with its increased production level, the global oil market has to deal with OPEC's increasing output, whether it has an official output ceiling or not.

"OPEC said it will maintain actual production levels, which is around 31.5mbpd. But, they didn't make it official," Haywood said.

"Ultimately, this doesn't change the supply in the market, which is still oversupplied. OPEC has been producing around 31.5mbpd in the past months anyway," he added.

Haywood believed cartel members will continue to produce and export more, regardless of OPEC's official quota.

"There could have been a raise in the production quota, but that does not bring any new supply of oil into the market. Oil is already there, and the market is oversupplied right now," he added.