Iran hits out at Saudi Arabia for pumping 'above target'

Iran's oil minister told his Saudi counterpart that the OPEC supply pact from last year does not give member countries the right to raise oil production above their targets, according to a letter reported by Iran's news agency Shana.

Last month, members of OPEC agreed to pump an additional 1 million barrels of crude daily, a move that should help contain prices. Saudi Arabia pledged a "measurable" supply boost, but gave no definite numbers.

"Member countries committed themselves to reach a production adjustment conformity level of 100 percent, as of July 1, 2018," Bijan Zanganeh wrote in a letter sent to Saudi Energy Minister Khalid al-Falih, according to Shana.

"However, the aforesaid decision neither warrants member countries the right to exceed their production level above the allocated production level decided... nor the right to redistribute the unfulfilled production adjustment commitments among member countries."

Falih, who chairs a committee that monitors production compliance, informed OPEC last week that they will no longer report individual conformity levels.

"The shift from reporting individual country conformity to reporting overall conformity will be adopted.... countries will strive to adhere to the overall conformity level, voluntarily adjusted to 100 percent as of July 2018," Falih wrote in the letter seen by Reuters.

If group members have pumped more crude than allowed in the supply agreement, OPEC could be seen as losing its effectiveness warned Iran's oil minister.

"Some member countries' production level in June 2018 was far above the agreed production level allocated to them," Zanganeh wrote in a separate letter sent to his UAE counterpart Suhail al-Mazrouei, who holds the OPEC presidency in 2018.

"This is a violation of their commitments... We are concerned that this violation may continue in the remaining implementation months ahead... and turn into a routine practice," Zanganeh said in the letter reported by Shana.

While no country was named by Zanganeh, OPEC's biggest producer is Saudi Arabia, and they reported that the kingdom had pumped 10.489 million barrels per day in June, up 459,000 from May and above its target of just over 10 million bpd.

"In case the OPEC member countries do not fully adhere to their commitments, the effectiveness of this organisation as the only developing countries' intergovernmental organisation with almost 60 years of history, will be gradually eroded," Zanganeh said.

Earlier in the month, US President Donald Trump launched an attack on OPEC accusing it of "manipulating" the oil market.

He warned "they better stop it", after demanding they increase production by 2 million barrels per day to counter the heavy sanctions on Iranian oil exports that Trump himself imposed.

Trump's motive behind lashing out at OPEC is probably linked to the fact that summer months in the US usually sees increased demand for oil, pushing up the price of gasoline ahead of the mid-term elections this year.