Iran: Surging Prices not Affected by Increasing Output

12SADASD5.jpgTEHRAN (FNA)- Major crude oil producer Iran said on Friday that increased oil output would not affect skyrocketing prices after a statement by Saudi Arabia revealed that the kingdom would pump more crude to market.

“Increase in oil production does not have such an impact that it would decrease prices because enough oil exists in the global market,” Iranian Oil Minister Gholam Hossein Nozari was quoted as saying by the MNA.

“Just compare 300,000 (barrels per day) with about 86 million (bpd), which are the market’s need! What would be the effect?” Nozari asked rhetorically.

A statement posted on Thursday on the website of the Saudi embassy in London said the kingdom would boost its daily oil output by 200,000 barrels.

The statement was later withdrawn from the website but not officially denied.

Oil prices eased on Thursday following the statement by Saudi Arabia, the oil kingpin of the Organization of Petroleum Exporting Countries.

But on Friday the benchmark oil futures contract, New York’s light sweet crude for July delivery, rose 77 cents to 132.70 dollars a barrel.

In London on Friday , London’s Brent North Sea crude for August climbed 1.20 dollars to 133.20 dollars.

Iran is OPEC’s number two producer, behind the Saudis, and has consistently argued that the high oil price has nothing to do with market fundamentals and OPEC’s output should not be increased.

Officials in the US and other major oil-consuming countries have repeatedly called on the Organization of Petroleum Exporting Countries to meet ahead of its next scheduled meeting in September to discuss production increases. Rising fuel costs have heightened concerns about an economic recession in the US.

Officials at OPEC have long maintained that factors beyond their control, such as speculation, a weakening US dollar and inadequate refining capacity are behind the drive in crude oil prices.

Riyadh had ramped up output by 300,000 bpd last month following a visit by US President George W. Bush to the kingdom.

Iran’s OPEC representative Mohammad Ali Khatibi described on Tuesday as a “wrong move”, if Saudi Arabia raised its oil output “unilaterally” without a consensus from fellow members of the oil cartel.

“Any increase in production should be approved in the meeting of the organization’s ministers,” Khatibi stressed.

Jeddah hosts a meeting of the world’s top oil producers and consumers on Sunday aimed at soothing rattled markets.

According to industry analysts, OPEC’s spare production capacity – estimated at just over 2 million barrels a day – is too limited to have a significant downward effect on prices. Most of the organization’s spare capacity is largely accounted for by Saudi Arabia, its number one producer, and partly by the United Arab Emirates.

Members such as Iran, according to experts on the country’s energy industry, are currently producing close to capacity, and need large amounts of investment – approaching $100 billion – in order to maintain current production levels over the next 10 years, and much more than that to expand production significantly.

Analysts view geopolitical factors as among the main causes of recent hike in prices, saying that fears of a new Middle East conflict are behind the new high for oil prices.

Market analysts, specially those from consumer nations, take Bush administration responsible for the price hikes in recent months, saying that it is the “rumors of US and Israeli action against Iran circulating in the markets” that affected oil and the dollar.

Check Also

China, the US, and the battle for Middle Eastern technology

The US is changing its approach to dealing with China’s technology statecraft in the Middle …