Iran is reportedly prepared to add another 100,000 barrels if OPEC ends its production cuts early. File Image / Pixabay
Those who viewed Monday's crude losses as more evidence of a sentimentally over inflated market that is fragile to very real fundamentals were no doubt further disheartened by Iran's oil minister bragging that his country will be able to swiftly increase production if the Organization of the Petroleum Exporting Countries (OPEC) decides to scrap its output curbs.
Bijan Namdar Zanganeh told reporters in Tehran the Islamic republic can raise daily production by at least 100,000 barrels within "five or six days" if OPEC decides during its June meeting that crude prices are high enough to justify abandoning its oil cuts.
He remarked, "We're always adding to our production levels, from West Karoun and Azadegan," and of the chance of OPEC terminating its deal before the agreed-to expiry of end of this year, he added that "my impression is that OPEC members are not after very expensive oil because very expensive oil leads to mid-term price fluctuations."
Bijan Namdar Zanganeh, oil minister, Iran
My impression is that OPEC members are not after very expensive oil
Remarks made concurrently by Nansen Saleri, former head of reservoir management at Saudi Aramco and now chief executive officer of Houston-based Quantum Reservoir Impact, support the argument that instead of a temporary blip, crude's recent losses may be more long-term: he referred to the U.S.'s Permian Basin as resembling Saudi Arabia, with as much as 1 million barrels of spare oil capacity ready to go into production.
He said, "For decades there was one country and one company that had spare capacity and that country was Saudi Arabia and that company was Saudi Aramco; now we are seeing an analog to that in the Permian."
Saleri added that the region can increase output in three to four days, faster than anywhere else except in fields run by Saudi Aramco, and he predicted that the Permian drillers will produce at least 3 million barrels per day (bpd) of crude oil in a year, up from the current 2.6 million bpd.
Meanwhile, the hawkish U.S. government has no intention of allowing countries governed by oppressive regimes free reign in the global market: Rex Tillerson, secretary of state for the U.S., said Washington is continuing to consider restricting the sale of oil from Venezuela and that officials are analyzing the impact of potential oil sanctions on business interests.
American sanctions have already caused the Bolivian republic to post 2017 crude sales to the U.S. that were the lowest since 1991, but it's unclear whether further restrictions would cause a crude price surge due to impacted global stockpiles, or no change in price because production from the U.S. and other countries would take up the slack.
Robin Mills, chief executive officer of Qamar Energy, last month illustrated the fragility of the global supply and demand balance by pointing out that Iraq alone could ruin OPEC's efforts if it produces 5 million bpd by the end of this year, as it intends to do.