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Iran Press TV

Official: Iran not interested in oil price war

Iran Press TV

Wed Jan 6, 2016 11:22AM

Iran has no intention to wage a price war with fellow OPEC producers when sanctions on the country are lifted, a senior official says.

Oil producers which ramped up output to replace Iranian barrels when sanctions were imposed in 2012 are refusing to scale back exports now that Tehran seeks to return to the market at pre-sanction levels.

Officials have said Iran would not wait for other producers to make room for it and step up output from day one when the sanctions are removed.

With a supply glut having driven crude prices to their lowest in 11 years, Iran's ramp-up is said to further weigh on the market, but head of international affairs at the National Iranian Oil Company (NIOC) played down those fears.

'I have to say that there is no room to push prices down any further, given the level where they are,' Mohsen Qamsari told Reuters.

The official said, 'We will be more subtle in our approach and may gradually increase output.'

Saudi Arabia is one of the few producers selling oil above its OPEC quota and the major driving force behind the existing supply glut.

Mainly because of the Saudi oversupply, OPEC is producing close to record levels above 31.5 million barrels per day, well over the organization's nominal target of 30 million bpd.

The kingdom reportedly ended 2015 with more than 10 million barrels per day for nine straight months. Saudi Arabia has further thwarted OPEC efforts to put any caps on production and restore a quota system.

While Riyadh continues with its aggressive market game, Qamsari said, 'We don't want to start a sort of a price war.'

Minister of Petroleum Bijan Zangeneh, who has said Iran would go full throttle to increase output, put a caveat on the plan last week.

'We are not seeking to disrupt the market but will regain our market share,' Zangeneh told reporters on the sidelines of an oil forum in Tehran.

Qamsari said then Iran will produce as much as the market can absorb.

Buying refineries abroad

Iran's strategy for raising production without harming the market is to buy refineries overseas, Qamsari said.

Officials have said NIOC was in negotiations to buy equity stake in India's Essar Refinery, with similar talks also held with European, South American and Asian companies.

India is the second biggest client of Iranian crude after China and Indian refiners reportedly owe about $6 billion to Tehran. Essar depends heavily on Iran to feed its Vadinar refinery of 400,000 barrels per day.

Qamsari said Indian refiners including Reliance Industries, which has halted imports of Iranian oil because of the sanctions, were interested in taking higher volumes from NIOC, Reuters reported.

Indian refiners were interested in buying West Karun grade, a blend of oil from 4-5 reservoirs, he said.

Japan's new contracts

Other major customers of Iranian crude are South Korea, Japan and Turkey.

On Tuesday, Japan's JX Nippon Oil & Energy Corp said it has renewed annual term oil purchase volumes from Tehran for 2016.

JX had a contract to buy 53,000 barrels per day (bpd) of Iranian crude in 2015 and the company kept its volume 'unchanged' in the new term contract starting this month, Reuters said.

Asked if JX would increase buys from Iran, its chairman Yashushi Kimura said, 'That would depend on the economics.'

Japan's other major buyers of Iranian oil are Showa Shell Sekiyu and trading houses Toyota Tsusho and Mitsubishi Corp. Showa Shell is Japan's biggest buyer of Iranian crude, importing about 70,000 barrels per day in 2014.

They sent their executives to Tehran with Japanese Foreign Minister Fumio Kishida to discuss raising oil imports from Iran.

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