“You know that higher oil prices will make everyone happy in the short-term but in the long-run it won’t be gratifying,” said Zanganeh following a virtual ministerial meeting of an alliance of international oil producers known as OPEC+, according to Press TV.
Zanganeh said that higher oil prices, as pursued by some oil producing nations, will encourage more activity in sectors like shale oil, where production is considered most expensive, while it would give a new momentum to the alternative sources of energy like the renewables.
“If we consider the combination of alternative energies and expensive productions, which become economical with higher prices, the surge would not be a good news for (producers),” the minister was quoted as saying by iribnews.ir.
Iran has been exempted from supply cut agreements agreed between OPEC and allies in recent years. Zanganeh said, however, that the OPEC+ would need to consider the impacts of Iran’s return to the markets once the country is relieved from sanctions targeting its oil sales.
“Iran’s return to the market will be a major development which would be influential and whenever this takes place I think OPEC+ will not be able to ignore it,” said Zanganeh.
Oil prices fell more than two percent on Monday afternoon during Asia hours after OPEC and its allies agreed to end oil production cuts, CNBC reported.
Brent crude futures fell 2.13% to $72.02 per barrel, while U.S. crude futures fell 2.09% to $70.31 per barrel.
“I think they decided that having a deal was better than no deal,” Andy Lipow, president of Lipow Oil Associates, told CNBC.
The group agreed to increase production by 400,000 barrels per day on a monthly basis from August, as it moves to phase out production cuts of about 5.8 million barrels per day by September 2022. It comes as oil prices hover close to their highest levels in more than two years.
Negotiations to increase production previously stalled, after the United Arab Emirates rejected the group’s proposal for the rollback of the oil cuts. It left the industry as well as investors in limbo as experts warned that prices could either hit the roof or collapse without an agreement.
Time to buy
This could be a buying opportunity for investors, said Lipow.
The “silver lining” is that the pace that OPEC+ is restoring oil production is still slower than the increase in global demand for oil, he said. That will support prices ahead.
“Really, this is a buying opportunity for well over the next six months, as those inventories around the world continue to decline. Here in the United States, we’ve reduced our crude oil inventories by 75 million barrels since April 1, and that’s indicative of what’s happening around the rest of the world.”
Lipow said oil prices could go up to $78 a barrel for international benchmark Brent.