Saudi-Iran oil row bursts into open

Click to follow
BICKERING between Saudi Arabia and Iran over oil production burst into the open yesterday, further undermining attempts by the Organisation of Petroleum Exporting Countries to shore up the sagging oil price.

Hisham Nazer, the Saudi oil minister, said that production figures for June showed that Iran was pumping 277,000 barrels per day more than its Opec-decreed daily quota of 3.34 million barrels.

'With this continuous excess of its quota it alone bears the responsibility for the collapse of the prices on the market,' he said.

He also said that Iranian complaints that Saudi Arabia's quota was too high were unjustified. On Thursday the official Tehran Times said that Saudi Arabia's limit should be cut from 8 million to 5.3 million bpd, the level before the Gulf crisis.

Opec's president, Jean Ping, flew from Saudi Arabia to Iran yesterday, but he had already abandoned plans to hold an emergency meeting next week to discuss production cuts, having been told in Riyadh that this would only make divisions public.

Oil producers and markets have become increasingly nervous in the past two weeks, as the probability that Iraq will resume exports has increased. Traders believe that progress on UN monitoring of Iraqi military sites could be followed by further moves to lift the oil embargo on Baghdad. The UN wants exports to restart so that revenues could be used to pay for its humanitarian efforts in Iraq.

Brent crude, the international marker, dropped below dollars 16 on Monday, compared with Opec's target of dollars 21, following news that Iraq had agreed to UN monitoring of two missile test sites. It see-sawed through the week, and ended at dollars 16.72 yesterday.

According to Peter Bogin, of Cambridge Energy Research Associates, most Opec members, with the main exception of Saudi Arabia, have been breaking quota limits agreed at a meeting in June. Opec production is now 800,000 bpd above the supposed limit. The situation has been aggravated by Kuwait's refusal to sign the agreement: it says it will increase production from 1.9 million bpd to 2.16 million bpd by the end of September.