Tehran (Platts)--19Apr2012/404 am EDT/804 GMT

Iranian Oil Minister Rostam Ghasemi said Thursday that Tehran had communicated to OPEC its objection to overproduction by some members, including Saudi Arabia, and warned that relations with the OPEC kingpin would be affected if Riyadh does not comply.

"It is our right as an OPEC member to object if production goes beyond the approved [OPEC] ceiling and I have communicated this to OPEC," Ghasemi told a Tehran news conference when asked to react to reports that Saudi Arabia would make up for the loss of Iranian crude oil as a result of EU sanctions.

"But some countries have not complied with this and Saudi Arabia is among them and this will definitely affect our oil interactions with them," he added.

Saudi Arabian Oil Minister Ali Naimi has said that the OPEC kingpin would be prepared to meet any oil market shortfall, whatever its cause, by tapping into its spare production capacity. He has not referred specifically to Iran.

At the last OPEC meeting in December, the cartel set a ceiling of 30 million barrels for all 12 members, but did not allocate individual quotas.

Saudi Arabia has said that it is producing 10 million b/d currently, having raised its output in the last few months from 9.7 million b/d in November, according to a Platts survey of OPEC's production. Output from Iran, however, had been falling steadily even before EU sanctions come into effect.

The latest Platts survey shows Iranian output at 3.4 million b/d in March, down from 3.55 million b/d in December.

Iranian officials have not given any precise figures for Iranian oil exports, which are believed to have fallen by an estimated 300,000 b/d last month, according to independent tanker tracking data. Platts reported earlier this week that Iran may be storing up to 16 million barrels of unsold tankers offshore. NIOC officials have said that Iran was exporting an average 2.2 million b/d.

The EU has imposed an embargo on Iranian oil exports from July 1, after which Iran would have to sell the estimated 500,000 b/d it exported to Europe last year in alternative markets. Several buyers of Iranian crude oil in both Europe and in Asia, Iran's biggest market, have said they would be looking to Saudi Arabia, among others, to replace Iranian barrels.

ASIAN BUYERS REDUCING IRANIAN PURCHASES TO OBTAIN US WAIVER Asian buyers of Iranian crude oil are having to reduce their purchases of crude oil from Iran to obtain waivers from the US, which has imposed its own sanctions against Tehran over its controversial nuclear program. The US sanctions would bar any company or entity from the US financial system if they continue to deal with the Iranian central bank but provide exemptions for countries that reduce significantly their imports, which would make it harder for Iran to place its barrels in Asia.

Japan, one of the biggest buyers of Iranian crude oil in Asia, has already secured a waiver from the US, along with 10 European countries, after pledging to cut its imports from Iran.

Ghasemi said that he hoped that the EU sanctions would be lifted when world powers meet in Baghdad for a second round of nuclear talks with Tehran on May 23. A first round of discussions with the so-called P5+1 group -- the US, Russia, France, Britain, China plus Germany -- was held in Istanbul on April 14, with both sides describing the talks as positive.

"We hope the Baghdad talks will be positive and if European countries do not lift the sanctions, we hope that this will happen at the Baghdad meeting," Ghasemi said. "If not, oil exports [to Europe] will definitely be cut."

He added that Iran had a choice of markets where it could sell its oil.

"Iran's oil has many markets, especially in developing countries and there is no problem with our presence in the market," Ghasemi said.

Japanese refiners that have completed their new term contract negotiations with the National Iranian Oil Company have already reduced their purchases, though the exact volumes are not known. Under the agreement reached with Washington, Japanese refiners are understood to be reducing their purchases of Iranian oil by between 15% and 20% for the year ahead.

Sri Lanka, which relies almost exclusively on Iran for its crude oil needs, has also said that it is seeking to cut its imports by 3 million barrels, while South Korea, another major NIOC customer, has said that it is still negotiating the extent of a cut with Washington.

"Japan is taking our oil in accordance with the volume of the contracts and if it does not, there will be no problem. There is a replacement for it," Ghasemi said.

The sanctions against Iran have had an impact on oil prices, Ghasemi said, noting that oil prices had risen 18% in recent months. Oil prices have softened in recent days, partly because of the reduced tensions between Iran and the West.

Ghasemi said that the oil market would react should the Baghdad talks fail to resolve the nuclear issue.

"If the talks are not positive, the energy market will definitely witness serious [price] fluctuations," he said.

--Aresu Eqbali, newsdesk@platts.com

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