A disagreement has erupted between the United States and Iran over the amount of oil nations can put on the world market under current agreements. US President Donald Trump wants Saudi Arabia and other members of the Organization of Petroleum Exporting Countries to fill a supply gap that may occur once US sanctions begin to curb Iranian crude exports. Iran has strongly disagreed that the organization has the ability to grant Trump’s request.
Iran currently ships about 2.5 million barrels of oil a day around the world. That amount could be reduced by 50 percent once American sanctions take effect on Nov. 4. Washington wants that amount to be made up by other OPEC members and its allies to avoid disruptions to the market. The US is also considering the release of oil from the nation’s 660-million-barrel Strategic Petroleum Reserve to ensure a continuing supply for consumers.
A message last week from Iran’s representative to OPEC urged the US to drop sanctions on Iran’s crude exports instead of using the nation’s stockpile of oil to push prices lower. The country has repeatedly said that US efforts to cut off Iranian exports isn’t “viable.” US Treasury Secretary Steven Mnuchin said it had been made clear to allies that Washington expects them to enforce sanctions against Iran.
Iran has warned that any breach of OPEC’s oil production ceiling will hurt the effectiveness of the organization. In a letter to OPEC President Suhail Al Mazrouei, Iran Oil Minister Bijan Namdar Zanganeh noted that output by some member countries in June was “far above” what it should have been in violation of the agreement reached by the nations. Zanganeh wrote, “We are concerned that this violation may continue” for the rest of the agreement “and turn into a routine practice.”
OPEC and allies agreed last month to increase production to levels assigned in late 2016, effective this month. Russian Energy Minister Alexander Novak has said that Russia and other oil producers could raise output by 1 million barrels per day or more if shortages hit the market. Saudi Arabia has also indicated that it would be able to boost output if needed, but declined to put an exact figure on the amount.