Iran has ordered a rise in oil output by 500,000 barrels a day following the lifting of sanctions, official media reported, but fellow OPEC member the United Arab Emirates said any extra crude would delay the market’s recovery.
Iranian officials have said repeatedly in recent days that they were ready to raise output by half a million barrels per day, pouring more supply into a market glut that has routed global crude prices. Tehran has not outlined what this would mean for exports but has also pledged to boost production further in the coming months.
Oman, which is not a member of the Organization of the Petroleum Exporting Countries (OPEC), said it was not worried by the prospect of extra Iranian supply because the market was already awash with oil but said it was ready to cut output.
Oil prices hit their lowest since 2003 on Monday as the market braced for additional Iranian exports, but later turned positive. Benchmark Brent crude was trading at around $29.25 at 1220 GMT.
“Iran is able to increase its oil production by 500,000 barrels a day after the lifting of sanctions, and the order to increase production was issued today,” Deputy Oil Minister Rokneddin Javadi, who also heads the National Iranian Oil Company, was quoted as saying by Iran’s Shana news agency.
The United States and European Union on Saturday revoked sanctions that had cut Iran’s oil exports by about 2 million barrels per day (bpd) since their pre-sanctions 2011 peak to little more than 1 million bpd.
In the first comment by a Gulf OPEC member about Iran since sanctions were lifted, UAE Suhail bin Mohammed al-Mazroui said that any new production coming into the market would delay the rebalancing of the market and “that’s the bad news”.
“Does Iran have the right to do so? Yes because they are a member of OPEC. Is it going to help the situation? No,” Mazroui told reporters on the sidelines of a conference in Abu Dhabi.
Oman was ready to cut output by between five and 10 percent to stabilize the oil market and urged all producers should do the same, Omani Oil Minister Mohammad bin Hamad al-Rumhy said.
OPEC forecast on Monday that oil supply from non-member countries would post a larger-than-expected decline this year due to the collapse in prices.
Supply outside OPEC would decline by 660,000 barrels per day (bpd) in 2016, led by the United States, OPEC said in a report. Last month, OPEC predicted a drop of 380,000 bpd.
The report did not mention the supply impact of the lifting of sanctions on Iran but if exported, the 500,000 bpd would fill most of the hole left by non-OPEC members.
Nevertheless, analysts say Iran may struggle to rapidly boost its production because its infrastructure, harmed by years of inactivity, needs foreign investment that will take time to arrive.
On Sunday, the head of Italy’s Eni SpA said Iran would need to attract $150 billion to become a major producer, and that “is not something that can be done in a second”.