Oil producers meet to discuss output amid Iran tension

Jeddah, Saudi Arabia

MAJOR crude producers met on Sunday to discuss how to stabilise a volatile oil market amid rising US-Iran tensions in the Gulf, which threaten to disrupt supply.

Key Organization of the Petroleum Exporting Countries (Opec) members and other major suppliers including Russia assessed the oil market and examined compliance to production cuts agreed late last year. But the subject of Iran, which was not present, dominated the one-day meeting of the Opec+ group. This comes days after sabotage attacks against tankers in highly sensitive Gulf waters and the bombing of a Saudi pipeline by Iran-aligned Yemen rebels.

The meeting also came as the full impact of re-instated US sanctions against Teheran kicks in, slashing the Islamic republic's crude exports.

Hours before the meeting in Jeddah, host Saudi Arabia said that it does not seek war with Iran, but is ready to defend its interests.

US President Donald Trump said last month that Saudi Arabia and other Opec members had agreed to his request to boost oil production in order to tamp down rising prices.

Massive drops in exports by Iran and Venezuela plus output cuts of 1.2 million barrels per day (bpd), implemented by the Opec+ group since January, have cut supply. But United Arab Emirates (UAE) Energy Minister Suheil al-Mazrouei said that inventories were still building up. He told reporters on Saturday that the job of balancing the market was not yet complete, a hint that any ramp-up in production could send prices crashing as they did in late 2018.

Opec and the International Energy Agency (IEA) said earlier this month that global oil supply fell in April due to US sanctions on Iran tightened and Opec+ production cuts.

The IEA said that Iranian crude production fell in April to 2.6 million bpd, down from 3.9 million bpd before Washington announced in May 2018 that it would withdraw from the 2015 Iran nuclear deal and re-impose sanctions.

Iran's output is already at its lowest level in over five years, but could tumble in May to levels not seen since the devastating 1980-1988 Iran-Iraq war. Energy intelligence firm Kpler sees Iranian exports plunging from 1.4 million bpd in April to around half a million barrels in May - down from 2.5 million bpd in normal circumstances.

Venezuela's output is also tumbling, down by over half since the third quarter of last year.

Kpler data shows that Opec+ members have kept to agreed production cuts.

But exporters fear that a rush to raise production to plug the gap left by Iranian exports could backfire, triggering a new supply glut.

Sunday's meeting came amid soaring Gulf tensions after the mysterious sabotage of several tankers off the Emirati coast and drone attacks, claimed by Iran-aligned Yemen rebels, which shut a key Saudi crude pipeline. Both attacks targeted routes built as alternatives to the Strait of Hormuz, the conduit for almost all Gulf exports.

Iran has repeatedly threatened to close the strait in case of war with the US, which said this month that it was sending an aircraft carrier and strike group to the region. Saudi Arabia accused Iran of ordering the pipeline attacks, targeting "the security of oil supplies . . . and the global economy".

Saudi Foreign Minister Adel al-Jubeir said on Sunday that his country does not want war with Iran, but was ready to defend its interests. Riyadh "does not want a war, is not looking for it and will do everything to prevent it", he told journalists in Riyadh. AFP