Iran may cut output amid surging oil prices

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OUTPUT CUT: Iran is reviewing whether to cut oil output, Ahmadinejad said. (Getty Images)

Iranian President Mahmoud Ahmadinejad said a proposal for Opec's second biggest producer to cut crude output was under review by experts, Iran's semi-official Fars New Agency reported on Tuesday.

Oil Minister Gholamhossein Nozari said earlier on Tuesday the world's fourth-largest oil exporter was reviewing how much oil it pumps but had taken no decision on any changes.

"There has been such a proposal and it is under expert review," Fars quoted Ahmadinejad as saying when asked about the possibility of reducing output.

US oil futures hit a record $126.98 a barrel on Tuesday after Ahmadinejad's comment added momentum to a rally on tight fuel supplies.

Neither Ahmadinejad nor Nozari said why Iran was reviewing output, which hit 4.203 million barrels per day (bpd) in March, the highest level since its 1979 Islamic revolution.

"So far we have not decided to decrease output. We are reviewing the issue. The result of this review could lead to an increase or decrease of production," Nozari was quoted as saying by the Oil Ministry's website Shana.

"The amount of production and oil supply will be in proportion to the market's demand," he said.

Iran's semi-official Fars News Agency said on Tuesday Nozari had rejected talk of a cut.

Earlier, Fars quoted an informed source saying Tehran would begin curbing output next month, probably by between 400,000 bpd and one million bpd.

Refiners in Asia, customer for around 60% of Iranian crude, said they have not been informed of any output cuts.

The review of crude output may be connected to the growing volume of oil Iran is holding offshore in vessels being used as temporary storage, an oil industry source said. Iran would like to avoid adding to the offshore fleet, the source added.

The country has chartered a fleet of supertankers to store over 28 million barrels of crude, and booked another tanker to add to the 13 vessel fleet, shipping sources said on Tuesday.

Iran has trimmed exports by about 200,000 bpd since early April to match a fall in demand from refiners in maintenance, a top oil official said last week, adding shipments should recover during the second half of May when refiners restart production.

Bijan Khajepour, head of Atieh Bahar Consulting in Tehran, said he did not believe Iran would reduce output. He said Iran would lose international clients and that the country did not have enough capacity to refine the crude itself.

"I would be very surprised if they cut oil production," Khajepour told newswire Reuters.

Opec has repeatedly rejected calls for more oil to try to ease prices, saying the market has been driven by factors other than supply and demand.

Senior management at the state-run National Iranian Oil Company attended a scheduled annual meeting in Tehran on Tuesday, an industry source said. (Reuters)

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