Glgroup: Turbulent geopolitical speculations plus an exceptionally freezing winter season, can hike crude oil price, making it a “trader’s market”. These prices will be mostly dictated by its inverse relationship to the U.S. dollar
As OPEC’s presidency is determined in alphabetical order, the member states highlighted in their October meeting that Iran’s year-long tenure would start as of 2011. Iran, which takes over from Ecuador, is OPEC’s second-largest oil producer and holds about 10 per cent of world oil reserves.
Iran is likely to host an OPEC meeting as the country which holds the organization’s rotating presidency can invite oil ministers of the member states to meet there once
OPEC is a permanent intergovernmental organization of 12 oil-exporting developing nations that also include Algeria, Angola, Ecuador, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.
With Iran at helm now, will it, or, can it use its position to drive its political agenda? And what impact these effort will have on the oil price and global economy?
We are starting 2011on a positive note; in the U.S. and euro area, people are looking for any signs of recovery and for that to flow on to demand the manufacturing data would have had a positive impact. It seems any news is being used as an excuse to increase the price of crude oil. By mid-January, it has already passed the $90. Usually high price of crude oil prompts the request of increase in the oil production, and the OPEC is the biggest producer. However, so far reactions and predictions do not indicate any upcoming changes: In early January, OPEC’s most influential oil minister, Saudi Arabia’s Ali al-Naimi, said he was still happy and there was no need for an extra OPEC meeting before the next scheduled on June. Two of Opec’s leading members, Iran and Kuwait, have denied that oil prices exceeding $90 per barrel were damaging the global economy, saying there was no need to increase supply.
Mohammad Ali Khatibi, Iran’s senior representative at Opec, told that the recent increase in oil prices was a “nominal” rise caused by the dollar’s decline. “Our concern is not the nominal price; it’s the real price,” he said. “The market is balanced for supply and demand, and there is no shortage right now, so no need to supply more.”
As the holder of Opec’s rotating presidency, it would be up to Iran to call any emergency meeting of ministers. But Mr Khatibi said that none was needed. “There will only be an extraordinary meeting if there is an extraordinary situation in the market, and so far we don’t see that.” “None of the OPEC members find
$100 concerning or irrational. Some of the OPEC members see no need for an emergency meeting even with prices at $110 or $120,” Mirkazemi, OPEC president for 2011, told a news conference.
Many in OPEC routinely blame speculators for rising prices but most analysts and industry figures say prices are increasing now because of a recovery in world fuel demand. Oil hit a record $147 a barrel in 2008 and while analysts do not expect a repeat of that any time soon there are fears that if OPEC does not signal its intention to add supplies, prices could rise significantly above $100.
In 2009, at a ceremony for the new oil-ministry of Iran, Pres. Ahmadinejad emphasized on the idea that “today, oil is being used as a weapon.” Prior to that, he had mentioned that the world is on the brink of a great change, which has begun in our region (Middle East). In the last OPEC meeting, he stressed that all OPEC member states should support one another.
Iran will certainly try to use its presidency position to drive its agenda, however looking back at the past decades with other countries at the helm of OPEC, it doesn’t look probable to be able to create a big shift in the global geopolitical and economy, especially with many influential Arab members who will follow Washington’s policy. In reality, the importance of the presidency of OPEC is not as much as its Secretary General. The Chief Executive of the OPEC Secretariat is the Secretary General, who is the legally authorized representative of the Organization. Iran has made multiple attempts to get this position in the past, but was stopped by Arabian countries, especially Saudi Arabia. So, one would assume that with further price increase, it is more inclined to believe that Saudi Arabia will act “responsibly” and encourage OPEC members to increase output early this year. That will be a meeting everybody wants to watch.
Baghdad recently raised its estimated oil reserves 24 percent to 143 billion barrels, ranking third behind Saudi Arabia and Venezuela. Iran responded by overtaking its former adversary by raising its oil reserves to 150.3 billion barrels. Iran, however, produces 3.7 million barrels of oil per day compared with 2.5 million barrels per day in Iraq.
The fight is not just over crude oil; Iran is one of the founders of GECT, The Gas Exporting Countries Forum. It is an intergovernmental organization of some of the world’s leading natural gas producers. GECF members together control over 70% of the world’s natural gas reserves, 38% of the pipeline trade and 85% of the liquefied natural gas (LNG) production.The three largest reserve-holders in the GECF--Russia, Iran and Qatar--alone hold about 57% of global gas reserves.
Iran has had more than its share of problem and challenges in the region, and they are increasing geometrically in the last one year.
At the end of September 2010, French giant Total (TOT), Anglo-Dutch group Shell (RDS-A), Norway’s Statoil (STO) and Italy’s Eni (ENI) all said they were pulling out of Iran as part of wide-ranging international sanctions to pressure the Islamic republic to halt its controversial nuclear program. Whereas, Elite Revolutionary Guards Corps boasted that it could take over projects from Western firms such as Total and Shell in South Pars. China, which continues to reject the imposition of new sanctions on Tehran, has emerged as one of the main investors in the Iranian energy sector.
The dispute with India escalated early January when Tehran refused to sell oil to the world’s fourth-biggest crude importer after New Delhi imposed prohibitive new rules. The Reserve Bank of India said deals with Iran must be settled outside a long-standing Asian Clearing Union system.
Iran will soon sign a $5 billion contract with a foreign company to develop its offshore Farzad-B gas field. The report did not name the company, but India’s state-run Oil and Natural Gas Corporation Limited (ONGC) heads a consortium which has exclusive exploration rights for the offshore Farsi block of which the Farzad-B gas field is part. ONGC and Indian Oil Corp each own a 40 per cent interest in the Farsi block, and Oil India Ltd holds the remainder.
Iran is hoping to use its position to create a presence in the neighboring countries; Iran has signed a 1.3 billion-dollar deal with a Turkish firm to build a pipeline for gas exports of 60 million cubic meters (2.1 billion cubic feet). In the same month, Iran to sign a long-term contract for import of up to 5 billion cubic meters of Azerbaijani gas to Iran annually. Iran has 10% joint-venture participation with BP and other foreign oil companies in Azerbaijani Shah Deniz gas field, producing 8 billion cubic meters of gas per year, worth up to a reported $2.4 billion per year. The Iranian entity with which BP has partnered in these ventures is the Swiss-based NaftIran, a subsidiary of NIOC.
The Islamic Republic says it needs around $25bn a year in oil and gas industry investment to meet its target development goal in oil and gas sectors.
In the meantime, the United States would look for the other members of OPEC to remind Iran that it could play “a more constructive role” in the region. A topic which has been in the US Secretary of State’s agenda of discussions with individual members of OPEC.
The tension over this black gold/weapon is getting fiercer every day. Obviously, the gloves are off. Competition of the USA, China, and Russia in controlling this essential material is clearer in the region.
Iran’s Oil Minister Masoud Mir Kazemi warned that the international community, and particularly Europe, could not do without Iran when it came to safeguarding energy security. “”Security of energy without Iran has no meaning,”” Mirkazemi said.