OPEC to Focus on Oil inventory While Others Debate Iran Sanctions Impact

OPEC is to focus on oil inventory, rather than price. File Image / Pixabay

It's certainly not the first time a member made the statement, but apparently Suhail bin Mohammed al-Mazroui, oil minister for the United Arab Emirates thought it was worth repeating when he told delegates to an industry event in Abu Dhabi that the Organization of the Petroleum Exporting Countries (OPEC) is focusing on inventory rather than targeting a specific oil price.

OPEC and Saudi Arabia made similar statements last year at the beginning of their initiative to curb oil production, and some pundits took this to be a way to avoid any predictions that could prove wrong of higher oil prices resulting from their cutbacks.

It seems that this time around, the statement was uttered in connection with the movement within OPEC to prolong the cuts indefinitely, which some say is driven by the desire to boost prices even further and thus improve the bottom line of many members' economies.

Mazroui, who is also OPEC's president, said OPEC at its next meeting is focused on "What is the right level of inventory that we should see and can we put this group together for longer."

He also downplayed the impact of oil supplies from renewed U.S. sanctions on Iran: "Don't worry about supply," he said, adding that this was not the first time an OPEC member had been in such a situation.

Another industry player who seems is indifferent to the Iran situation is Dharmendra Pradhan, oil minister for India: he told Bloomberg television that he expects "reasonable" oil prices following sanctions against Iran and that his country as an emerging major economy is open to crude imports from any and all sources.

Of course, not everyone is as cool headed as Pradhan or Mazroui: Claudio Descalzi, CEO of Italian oil and gas giant ENI, told CNBC that "The impact is more for the crude oil price, because Iran now is exporting about 2.6 million barrels [per day], and if we go back to the first sanctions, they were exporting 1.5 million."

Descalzi added that "We have a demand that is increasing 1.6 to 1.7 million bpd yearly average, so that is going to create a disruption in terms of cost and price, and when we have this kind of situation, the landscape becomes very uncertain."

What this amounts to on a grander scale, Descalzi argued, is uncertainty for investors, especially those involved with long term multi-billion dollar projects: "And when there is a lot of uncertainty, the investment is not easy to be performed; but there are so many other geopolitical issues, that the landscape is very difficult to understand where we're going."

If Descalzi's predictions proved true, this could presumably persuade Mazroui to reverse course and oblige OPEC members to pump more in order to compensate for Iran, instead of maintaining the cutbacks.

Of course, one should also take into account the remarks of someone who is arguably best equipped to judge how the sanctions will impact Iran: that country's oil minister, Bijan Namdar Zanganeh, who last week blasted U.S. president Donald Trump for cutting a deal with OPEC members to keep production down and prices high, and also insisted that the U.S. pulling out of the nuclear deal "will not have any impact on our oil export...that era is history now."