The Organization of Petroleum Exporting Countries (OPEC) seems increasingly unlikely to agree on a shared production freeze that might arrest a sharp decline in the oil cartel members’ gross revenues to 12-year lows.
An OPEC meeting in June failed to settle on member production quotas, and “I’m not overly optimistic about an oil freeze being agreed,” Patrick Allman-Ward, CEO of Dana Gas PJS, told Bloomberg. “The environment is not that conducive to a freeze. There’s pressure with Iran working to increase production.”
Iran was OPEC’s second-largest oil producer before the United States and other countries imposed sanctions in 2012 over its presumed pursuit of nuclear weapons. Since winning a relaxation of sanctions earlier this year, its Iranian government has set out to reclaim its former markets, and “won’t participate in a freeze in output before regaining its pre-sanctions share of OPEC production,” Bloomberg said, citing the state-run news service and Iran’s Oil Minister Bijan Zanganeh.
That insistence will likely serve to keep crude oil prices low—and with them, the revenues of many of Iran’s OPEC partners. According to Canadian energy industry blog JWN, the U.S. Energy Information Administration (EIA) has determined that “OPEC members earned US$404 billion in net oil export revenue in 2015, a 46% drop from 2014 earnings of $753 billion, and its lowest earnings since 2004.”
“And it’s expected to get worse,” JWN adds, with the EIA forecasting falling revenue for OPEC for the rest of the year, “primarily caused by declining crude oil prices.”
Iran’s dogged pursuit of its former market share and refusal to join a production freeze will do nothing to put a floor under that decline.