0341 GMT July 22, 2019
Members of the Organization of the Petroleum Exporting Countries (OPEC) in its consultative meeting in Algeria on Wednesday decided to cut oil output. The decision can be studied from several angles.
First, Iran and Saudi Arabia — the two main members of OPEC — showed that they are still able to play a key role in the organization's decision-making process.
Iran, along with Nigeria and Libya, were exempted from oil output cuts. This stems from convergence among OPEC members particularly, between Riyadh and Tehran.
Second, the meeting in Algeria raised hopes that the quota system will be revived in OPEC. Iran insists that it should regain its pre-sanctions market share of 14.5 percent. This boils down to over four million barrels of oil per day.
Third, the Islamic Republic has managed to raise oil output following the lifting of sanctions. Oil exports to Japan, South Korea and a number of European countries have almost doubled. Iran's energy market has also entered nascent markets.
Hence, the decision made at the Algeria meeting is in line with Iran's energy diplomacy.
Fourth, OPEC members agreed to cut output to 32.5 mbd — a figure which is currently 33.24 mbd.
Since Iran has been exempted from such limits, it will be able to boost its oil revenues. Likewise, Iran will benefit from an increase in oil prices which results from cutting OPEC's output by about 700,000 mbd.
Fifth, cooperation with non-OPEC members can highlight the impact of the consensus reached in Algeria. Non-OPEC members should also reduce output to help stabilize the market. Developments in the ensuing days can determine the bearing of the OPEC decision on global oil markets.