By BENOIT FAUCON
ISTANBUL -- Iran on Thursday accused Saudi Arabia of
breaching a collective OPEC agreement, reviving fears that the
producer group could fracture again when it meets in June.
Iran, along with its key ally Venezuela, has been escalating
rhetoric against OPEC members like Saudi Arabia that have
ramped up production in order to replace output from
That has raised fears that acrimony could return within OPEC
after Saudi Arabia and Iran - the group's two largest producers
- clashed at a gathering last year, bringing the meeting to
Any new split within the group - which is set debate output
again mid-June - could impede its ability to both coordinate
production and to keep a lid on oil-price volatility.
Iran's Oil Minister Rostam Ghasemi said OPEC "should produce
up to 30 million barrels per day [as a group], but some
countries including Saudi Arabia don't observe these
In December, OPEC - whose members produce over one in three
barrels consumed in the world each day - agreed to the
collective ceiling of 30 million bpd in December.
But the deal appears to have been still born. According to
its own statistics, the group's daily production is now higher
by 2 million bpd, largely driven by a Saudi move to replace
Ghasemi warned Iran was entitled to protest against
overproduction by another member in the group.
A Gulf OPEC official said the Saudis weren't aware of any
complaint to OPEC and are producing what their customers
But Venezuelan Oil Minister Rafael Ramirez on Tuesday said
OPEC is over-producing and flooding the market with oil.
The verbal attack on Saudi Arabia comes as Iran is facing
uphill challenges to sell its oil because of sanctions against
its nuclear program.
New international measures against its banking sector have
impeded its oil sales even before a full European ban on its oil starts this
According to consultancy Petro-Logistics, sanctions imposed
on Iran by the West have already led to a 14% drop in the
Ghasemi on Thursday denied the decline but he admitted that
Greek refiners and UK major Royal Dutch Shell were having
problems paying for Iran oil.
A spokesman for Shell - which Iran says has stopped getting
its oil due to the banking issue - declined to comment.
To dampen oil prices driven by Iran supply fears, Saudi
Arabia - the world's largest oil exporter - has hiked
production to 10 million bpd, its highest level in three
As a result, more than two years of steadily tightening
oil-market conditions have reversed, the International Energy
Agency, which represents the interests of major
energy-consuming rich countries, said last week.
Brent crude, the most widely used oil-futures benchmark
globally, has fallen by $10 to about $118/bbl in about six
Yet the Saudi boost could also exacerbate tensions that have
been slowly creeping back behind the drawn curtains of OPEC's
With Iran threatening to close the strategic Strait of
Hormuz to retaliate against sanctions, Gulf nations from Qatar
to Iraq have started beefing up security measures and looking
at possible alternative routes.
A private ceremony at the grandiose palace of the Amir of
Kuwait on the side of an energy conference last month gave a
taste of the atmosphere that might prevail at the next OPEC
Standing in the same room under the giant crystal
candlesticks and imposing columns, Ghasemi and Saudi Oil
Minister Ali al-Naimi ignored each other.
This was in contrast with the December OPEC gathering, where
they held a cordial bilateral meeting.
But experts say the current tension underscores a growing
threat to the group's relevance.
OPEC members "don't trust each other," said Dale Nijoka,
global oil sector leader at consultancy Ernst & Young. As a
result, "they aren't as effective as they once were. Everyone
has their own agenda."
Dow Jones Newswires