It was just announced that Iran, along with Iraq, is taking market share in the global oil trade away from Saudi Arabia following OPEC production cuts.
Christof Ruehl, former chief economist at BP who is currently Global Head of Research at the Abu Dhabi Investment Authority (ADIA) told Bloomberg: “If you’re talking about winners, you can count Iran and Iraq.”
The Saudis knew that they would be sacrificing a percentage of its dominant market share with the OPEC deal but opted for it anyway, in order to secure higher and more stable oil prices. The Saudis made this deal because long-running low oil prices have caused a considerable deficit in the country’s finances and they have had to dip into their reserves.
Robin Mills, the founder of Dubai-based consultancy firm Qamar Energy, said: “The Saudis agreed to production cuts at a time when Iranian production was at a high [following the lifting of international sanctions].”
The deal, which was agreed in December, allowed Iran to lift its output, while others — especially Saudi Abraia —would have to cut theirs.
Under the agreement, Saudi Arabia had to cut its output by 486,000 barrels per day (bpd) to a maximum of 10.058 million bpd, but they’ve kept their production under 10 million bpd. Iraq promised to cut theirs by 210,000 bpd to a level of 4.351 million bpd, but has failed to comply. Iran was officially allowed to up its output to 3.797 million bpd but instead, they have consistently exceeded that number by as much as they could.
Edward Bell, a commodities analyst at Dubai-based lender Emirates NBD PJSC, said: “The Saudis are losing out because other countries are able to squeeze out more production.”
The Saudi Minister of Energy and Industry Khalid Al-Falih told reporters on Wednesday, that there seems to be a consensus that this deal should continue.
How will this impact Iran?
The Iranian Regime is currently entrenched with crises; the most prevalent among them in unemployment and poverty.
An estimated 70% of Iranians live below the poverty line with the majority of people struggling to afford the basics. This situation has led to increased rates of malnutrition, disease, mental health issues, addiction, while many do whatever they can to get by, including prostitution and drug trafficking.
But no matter how much money, the Iranian Regime gets from this increased oil production, the Iranian people will see none of it. The Regime has already committed to an increased military budget, preferring to spend their resources propping up foreign dictators than feeding the hungry, treating the sick or employing the jobless.