The Lavan oil refinery quay on Lavan island off the south coast of Iran on May 16, 2004
The Lavan oil refinery quay on Lavan island off the south coast of Iran on May 16, 2004 © Behrouz Mehri - FILE/AFP/File
The Lavan oil refinery quay on Lavan island off the south coast of Iran  on May 16, 2004
Last updated: November 26, 2014

Oil market oversupply to increase next year: Iran

Banner Icon OPEC needs non-cartel members to help address an oil supply glut that is set to grow next year, Iran's oil minister said here Wednesday.

"All the experts in the markets believe that we have an oversupply on the market and next year we will have more oversupply," Iran's Oil Minister Bijan Namdar Zanganeh told reporters.

But Zanganeh said it was not solely up to the Organization of the Petroleum Exporting Countries to tackle the oversupply which is sending crude prices crashing to four-year low points.

"To deal with this situation we need to have a contribution from non-OPEC producers for managing the market," he told reporters on arrival in Vienna, where the cartel is headquartered.

Thursday’s meeting of OPEC is the most significant in recent years after crude futures have sunk by more than 30 percent since June on plentiful oil supplies, a strong dollar and worries about stalling energy demand in a weak global economy.

The cartel, which pumps out about one-third of the world's oil, is under pressure from its poorer members like Venezuela and Ecuador to cut output as tumbling prices have slashed their precious revenues.

However the cartel's Gulf members, led by kingpin Saudi Arabia, have rejected calls for a cut unless they are guaranteed market share in the highly competitive arena.

OPEC pumped 30.6 million barrels per day (bpd) last month, above its 30 million bpd target, according to the International Energy Agency, which advises countries on energy policy.

And some analysts believe that the cartel will on Thursday agree to trim such excess rather than cut its official ceiling.

"There remains little prospect of any production cut being agreed at tomorrow’s OPEC meeting," Commerzbank analysts said in a note to clients Wednesday.

"This was also made clear this morning by Saudi Arabia's Oil Minister (Ali) al-Naimi, who spoke out in Vienna against a production cut, going on to say that the oil market should stabilise itself instead.

"We believe this corroborates our view that OPEC will merely agree tomorrow to comply better with the current production target of 30 million barrels per day."

Ahead of the OPEC meeting, the world's top oil producer Saudi Arabia has cut what it charges US customers, in a move seen as a bid to maintain its market share amid increasing competition from oil extracted from shale rock in the United States.

Officials from Saudi Arabia met with their counterparts from Venezuela and non-OPEC oil producers Russia and Mexico in Vienna on Tuesday.

Russia's token reduction 

Following the surprise gathering, Russian oil giant Rosneft said it had trimmed its daily output by 25,000 barrels because of "market conditions".

The token reduction represented less than one percent of the behemoth's total and did nothing to boost energy prices on depressed global commodity markets.

Oil prices tumbled Tuesday, with the US benchmark down 2.2 percent, on expectations that the OPEC cartel will not agree to cut its official output ceiling.

The key US futures contract, West Texas Intermediate (WTI) for January delivery, dived $1.69 on the New York Mercantile Exchange, closing at $74.09 a barrel, its lowest level since mid-September 2010.

In Wednesday trade, WTI recovered somewhat to stand at $74.24 per barrel, up 15 cents from Tuesday.

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