Iran’s envoy to the Organization of the Petroleum Exporting Countries (OPEC) warned that global oil prices would slump to $40 a barrel without a significant cut in the output of OPEC and its allies.
Production will need to be reduced by at least 1.4 million barrels a day to prevent oversupply, Hossein Kazempour Ardebili said in an interview with Bloomberg.
Kazempour noted that OPEC may be unable to reach an agreement to curb supply when it meets in Vienna later this week.
OPEC seeks consensus on next year’s supply policy, with crude having slumped into a bear market last month.
While Saudi Arabian Crown Prince Mohammad bin Salman has agreed with Russian President Vladimir Putin to continue managing the market, Qatar in a surprise move on Monday said it will exit OPEC in 2019, threatening its cohesion. OPEC decisions need to be unanimous to be implemented.
“I don’t think they are thinking to have a cut -they may want to have excuses, or have a proposal on the table that is not grabbed by others, and say ‘OK, I told you so’,” Kazempour said.
The nations which have “put the barrels into the market in the last three months should cut it back,” he added.
“I doubt, with the failure they had in the last three months, that the declaration of cooperation gets extended,” Kazempour stated. “Why institutionalize a failure? And it needs unanimity to be extended.”
He also raised the prospect that OPEC, which has held together for more than half a century through war, sanctions and price slumps, may break apart.
“There is a sense of frustration prevailing, especially among small producers not at the level of Qatar,” because oil’s slump and the lost revenue gives them a reason to leave, the Iranian envoy said.