Iran, the number two oil producer in OPEC, on Sunday said that the organization is likely to cut back further on production if the latest reduction does not stabilize crude prices. The Organization of Petroleum Exporting Countries (OPEC), which produces 40 percent of world crude, decided Friday to reduce its production quota by 1.5 million barrels per day as of Nov. 1 to a level of 27.3 million bpd. Despite the announcement, the price of Brent North Sea crude sank to $61 a barrel, the lowest point for 17 months. “Be assured that if (Friday's) decision is not effective on the market, the OPEC will take steps to consolidate the market and stabilize prices at its next meeting,” Iran's OPEC representative Mohammad Ali Khatibi said in an interview on state television. OPEC has said its latest decision would be reviewed at its next meeting in Oran, Algeria, on Dec. 17. Many analysts have questioned the effectiveness of measures taken by OPEC, given the seriousness of the global financial crisis that has sharply reduced the prospects for economic growth and thus oil consumption. Crude futures in London and New York have plunged close to 60 percent from record highs of above $147 a barrel reached only three months ago when supply concerns sent prices soaring. Iran is being hurt by the financial crisis because of falling oil prices and a world downturn that will damage non-oil exports, an official said on Sunday, even though Iran's economy was relatively isolated. Iranian officials are voicing more concern about the impact of the international financial turmoil after initially brushing off the impact on Iran, which has an economy that has become increasingly isolated because of US and UN sanctions. Many Western banks have scaled back or cut dealings with Iran because of sanctions imposed over Iran's disputed nuclear work. But the world's fourth-largest oil producer has watched crude prices tumble and now expects to see other exports hurt. “Even though the Iranian economy is to some extent less tied in to the world economy, the first impact (of the crisis) on the Iranian economy is a drop in the oil price,” Kamal Seyyed Ali, head of Iran's export guarantee fund, said. International crude prices have tumbled from $147 a barrel in July to around $61 a barrel on Friday. Some economists say Iran needs $70-$75 a barrel, or more, to balance its books. In the comments reported on state radio, Seyyed Ali said a recession in the world economy would also hurt other exports. “This issue constitutes a major challenge for the country's non-oil exports,” he said. Iran's main exports aside from oil include carpets and pistachio nuts but they are relatively modest. Central bank figures for the year to March 2008 showed oil and gas exports at $81.8 billion compared with non-oil exports of $15.6 billion. The government has ordered the economy, commerce and agriculture ministries to “evaluate the impact of the global financial crisis on the Iranian economy”, radio said. Each ministry has set up a committee to study the issue, it added. Central Bank Governor Mahmoud Bahmani meets MPs on Sunday to explain the impact of the crisis, radio reported. A central bank official has already said the drop in oil prices, a result of deepening global economic slowdown, rang an “alarm bell”. Former President Akbar Hashemi Rafsanjani said Iran should be prepared for the economic “tsunami”.
