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How the Iran sanctions drama intersects with OPEC-plus

July 2, 2018

How the Iran sanctions drama intersects with OPEC-plus

Major states buying oil from Iran are unlikely to heed the US call to drop imports; key allies want a waiver to avoid sanctions; OPEC, meanwhile, will have trouble boosting output in the short-term; the puzzle is not solved, but there are dark clouds

A file photo taken in March 2017 shows an oil facility on Khark Island, on the Gulf. The US warned this week that countries must stop buying Iranian oil before November 4 or face economic sanctions. A State Dept official said tightening the noose on Tehran was a top national security priority. Photo: AFP/ Atta Kenare

A file photo taken in March 2017 shows an oil facility on Khark Island, on the Gulf. The US warned this week that countries must stop buying Iranian oil before November 4 or face economic sanctions. A State Dept official said tightening the noose on Tehran was a top national security priority. Photo: AFP/ Atta Kenare

History may have registered stranger geoeconomic bedfellows. But in the current OPEC-plus world, the rules of the game are now de facto controlled by OPEC powerhouse Saudi Arabia in concert with non-OPEC Russia.

Russia may even join OPEC as an associate member. There’s a key clause in the bilateral Riyadh-Moscow agreement stipulating that joint interventions to raise or lower oil production now are the new norm.

Goldman Sachs insists: “The oil market remains in deficit… requiring higher core OPEC and Russia production to avoid a stock-out by year-end.” Goldman Sachs expects production by OPEC and Russia to rise by 1.3 million barrels a day by the end of 2019. Persian Gulf traders have told Asia Times that’s unrealistic: “Goldman Sachs does not have the figures to assert the capability of Russia and Saudi Arabia to produce so much oil.

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