Published: Wed, July 11, 2018
Business | By Tara Barton

Iran downplays impact of US sanction threats on oil exports

Iran downplays impact of US sanction threats on oil exports

Iran, the fourth-largest oil producer, accounts for five per cent of global oil supply and cutting its exports to zero could push oil up by $50 barrels per day (bpd) if Saudi cannot keep up, said analysts at BofA Merrill Lynch Global Research.

He added such policy is against the founding principles of OPEC.

Based on IEA estimates, the kingdom can raise production to just over 12 million bpd and sustain it at that level for an extended period, the report added.

After India-US relations soured over India's oil imports from Iran, Iran has put India in a spot of bother now.

Iran's petroleum minister said that "political issues should not interfere in the crude market, and supply and demand should determine the final oil price".

Indications are growing that show the USA can not rely on Saudi Arabia for too long to make up for the missing Iranian oil supplies once American sanctions are re-imposed against the country.

The market has grown concerned that if the Saudis offset the losses from Iran, that will use up global spare capacity and leave markets more vulnerable to further or unexpected production declines.

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"OPEC alone can not be blamed for all the problems that are happening in the oil industry, but at the same time we were responsive in terms of the measures we took in our latest meeting in June", Organization of the Petroleum Exporting Countries President Suhail al-Mazrouei told Reuters in an interview in Calgary, Alberta.

Experts are also doubtful if Saudi Arabia can mobilize its forces rapid enough to boost its oil production and specifically maintain the rise over a long period of time.

The current all-time USA annual output peak was in 1970 at 9.6 million bpd, according to federal energy data.

More recent history shows Saudi Arabia has never produced more than 10.6 million bpd on average over a single month.

Domestic crude stocks have already fallen by 95 million barrels since their peak in October 2015, according to government data submitted to the JODI.

Most of the remaining inventories are required for operational reasons, including as feedstock for the country's growing refinery capacity, as well as ensuring smooth flow of oil from the fields onto tankers.

The Trump administration has aggressively pressed Saudi Arabia to boost output and the Saudis have complied, promising to ramp up production by as much as 2-million barrels a day.

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