Resolving Oil Market Issues Requires Global Cooperation: Iran Minister

Bijan Namdar Zanganeh said the recent drop in the oil prices was unprecedented, underlining that resolving the issues related to the oil market needs global support.

In comments on the sidelines of a cabinet meeting on Wednesday, he said the oil producers must work together to survive, especially the producers who pay more for oil production.

According to Shana, Zanganeh said that one of the main reasons for the oil prices plunge is the outbreak of the coronavirus.

“With the spread of this virus, the consumption of petroleum products has sharply decreased and a significant part of the world’s aviation industry has been shut down and passenger transportation has been disrupted,” he noted.

Under these circumstances, the refineries have reduced their production and demand for crude oil has fallen sharply, the minister added.

“OPEC initially estimated a surplus of 3 million barrels per day in the first three months of 2020. The estimate rose to 11 million barrels at a recent meeting of the OPEC and non-OPEC members in April, and the oil market is expected to face a 14 million barrel surplus in the second quarter of this year,” Zanganeh explained.

Noting that the coronavirus is the reason for the oversupply in the oil market, the Iranian oil minister stated, “Unfortunately, since March, we have witnessed the start of a price war by some countries. They bragged that they are increasing the supply of oil, and this has created the crisis in the oil market.”

Zanganeh stressed that the storage tanks were filled with the excess oil that entered the market, but it should be collected from the market.

“OPEC and non-OPEC members agreed at their recent meeting (April 12) to reduce their production by about 10 million barrels per day as of May 1,” he underlined.

Zanganeh noted that if the agreement is fully implemented as of May 1, calm will gradually return to the oil market.

What is important is that the market did not consider such reduction in the oil production (about 10 million barrels per day) sufficient due to the current conditions, supply and demand, and the uncertainty about the coronavirus crisis, he added.

The oil minister said the price of North Sea Brent crude fell below $20 yesterday and the OPEC oil basket reached $14.50, something the market had not experienced for years.

“This shows the depth of the problems that need to be addressed quickly and with the reduction of new production,” Zanganeh noted.

He further stressed that success in this issue depends on the actions of non-OPEC members, especially the producers who have not yet made any commitments, such as shale oil producers in the United States and Canada.

“This is a general crisis and must be managed globally, so the OPEC alone cannot solve this problem, and if all oil producers are not involved, they will naturally be punished in the market,” maintained the Iranian oil minister.

He also pointed to the bankruptcy of oil companies in the United States and Canada and said just as the entire world must work together to deal with COVID-19, solving the oil problem requires global cooperation, and producers must work together to survive, especially those who are producing more expensive oil.