NEW YORK: Many OPEC ministers meeting in Vienna Thursday may be giving quiet thanks that world powers who just met in that city failed to reach a nuclear accord with Tehran, pushing back for another six months any potential revival in Iran's oil exports.
On Monday, the deadline for concluding nuclear talks aimed at resolving a 12-year-old dispute over the country's nuclear program, Iran and six major powers agreed to another extension in the talks until June 30, 2015. While Iran's president Hassan Rouhani said on Monday that gaps had narrowed and positions were becoming closer, U.S. Secretary of State John Kerry said significant disagreement remained.
The lack of a deal removed, for the moment, one potentially complicating factor for the Organization of the Petroleum Exporting Countries (OPEC) at its meeting on Thursday: how to handle the recovery of 1 million barrels per day of Iran's oil exports that have been cut off by sanctions since 2012.
A recovery in Iranian supplies would further pressure global prices that have already fallen by more than 30 percent since June. It would also likely have added to friction between Iran and Saudi Arabia, two of OPEC's biggest members.
Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt, said that "the last thing" Saudi Arabia would want to be seen doing is cutting its own production to make way for rising Iranian supply.
Still, the delay may do little to help handicap the outcome of one of OPEC's most closely watched meetings in years.
The extension will "make it easier for Saudi Arabia to agree to an oil output cut at the OPEC meeting on Thursday," he Fritsch. It's "mildly bullish" for markets, he said.
Tariq Zahir of Tyche Capital in New York took a different view. By removing one bearish risk from the market, he said, OPEC may no longer be forced to take immediate action.
U.S. crude fell 77 cents a barrel while Brent dropped76 cents, as markets remained in a holding pattern ahead of the OPEC meeting. [O/R]
Saudi Oil Minister Ali al-Naimi arrived in Vienna on Monday, saying he is "as happy as can be" but brushing off questions about tumbling oil prices.
Oil traders had been positioned for a possible addition of crude from Iran, currently OPEC's third-largest member behind Saudi Arabia and Kuwait, with about 2.78 million barrels of crude production a day. Iran is now exporting about 1 million bpd, down from 2 million bpd prior to sanctions.
For oil markets, the risks may now tilt the other way. Certain U.S. senators have taken action that could result in further cuts from Iran, calling for more stringent sanctions.
New Jersey Democrat Robert Menendez and Illinois Republican Mark Kirk have pressured President Barack Obama to take a tough on Tehran. They have said they would push for more penalties if they were not happy with a deal.
“Clients have been very keen to understand what the implications are for the geopolitical landscape - I think many had assumed that there was more benefit from having the parties continue to negotiate,” said Barclays analyst Michael Cohen.
"The bigger issue will be whether Congress does implement parts of the Kirk-Mendenz Bill," he said.- Reuters
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