As oil prices fell to new six-year lows last week, Iran called on OPEC leader Saudi Arabia to take a stance on the global oil glut that has been plaguing the markets.
Hossein Amir Abdollahian, the deputy foreign minister of Iran told Reuters that if Saudi Arabia didn't do anything to control the oversupply, the falling prices would start affecting most of the Middle Eastern countries as well.
"There are several reasons for the drop of the price of oil but Saudi Arabia can take a step to have a productive role in this situation. If Saudi does not help prevent the decrease in oil price ... this is a serious mistake that will have a negative result on all countries in the region," Abdollahian said in an exclusive interview with the agency.
Led by Saudi Arabia, OPEC nations control 80% of the world's oil reserves and produce 40% of the oil in the world. In November's meeting, the cartel decided against an output cut adding that the non-OPEC members had to chip in to control the oversupply this time.
"We don't want to panic. I mean it. We want to see the market, how the market behaves, because the decline of the price does not reflect a fundamental change," Abdallah Salem el-Badri, the general secretary of OPEC said at that time.
OPEC fears that if they reduced output, other producers would clamour in to take hold of their market share. Analysts explain that the falling prices are good for low-cost producers with strong balance sheets, i.e. Saudi Arabia. Volatility hurts small players that are highly levered, that have weak balance sheets, i.e. US shale producers," Sabine Schels, an analyst at Bank of America told Bloomberg in a telephone interview.
But Iran has publicly opposed the cartel's decision to not cut supply. In Thursday's interview with Reuters, Abdollahian said that Iran plans on meeting with Saudi Arabia to talk about a possible cut.
How Low Can it Go?
Though OPEC production decreased by 270,000 barrels per day in December due to mounting tensions in Libya, it didn't impact prices much.
Oil prices ended 2014 declining to fresh lows. Crude-oil prices dropped 50% since the summer and natural-gas prices hit new two-year lows.
Crude oil is currently down to $53 while Brent Crude is hovering at $57. Experts say that prices could go as low as $30 this year.
"If this doesn't hold, we could go back to price levels in late 2008 and early 2009 -- down in the $30s. There's no reason why it couldn't happen," Darin Newsom, senior analyst at Telvent DTN was quoted by CNN Money.
Will OPEC Give In?
Some experts believe that OPEC has been a major supply regulator and will eventually step in to control the glut.
"Ultimately the big producers will make significant cuts to support prices," Dan Heckman, a national investment consultant at U.S. Bank Wealth Management told Bloomberg over the phone.
"It will take time to work off this huge supply glut," Heckman added.