Iran may ban export to EU, but oil shortage unlikely
Even as Tehran looks to ban the European Union oil exports, the world is likely to have more oil, not less, this summer.world Updated: Jan 28, 2012 01:11 IST
Even as Tehran looks to ban the European Union oil exports, the world is likely to have more oil, not less, this summer.
Although Europe's refiners will have to pay up for other sources of oil, they should have little difficulty finding them.
Extra crude oil from Saudi Arabia, Iraq and Libya will more than make up for any lost from Iran after the ban is imposed on July 1, and this is likely to be reflected in oil prices.
As much as 1 million barrels per day (bpd) more crude oil could be coming from these three producers alone - perhaps double the volume of Iranian exports lost to the European Union.
"The oil market should be very well supplied this summer - even better than now," said Samuel Ciszuk, Middle East and North African (MENA) analyst at consultancy KBC Energy Economics.
"Volumes from Iraq should be up significantly, Libya is doing very well and Saudi Arabia will increase production to compensate for some of the lost Iranian barrels."
The International Monetary Fund said on Wednesday sanctions against Tehran would imply supply declines of about 1.5 million bpd from the world's fifth largest oil producer, adding global oil prices could rise as much as 30 percent if Iran halted oil exports as a result of the West's actions.
But senior oil executives, traders and strategists see little chance of significant supply disruption this summer.
Although oil prices have risen on fears that conflict between Iran and the West could disrupt exports from the Middle East, they argue such a clash is extremely unlikely.
And with the European economy in the doldrums and Asian growth slowing, overall oil demand growth is being constrained.
Iran will keep selling its oil, much of it into Asia, where consumers will be only too happy to buy at the right price.
Outdoing EU embargo
"On Sunday, parliament will have to approve a 'double emergency' bill calling for a halt in the export of Iranian oil to Europe starting next week," Hossein Ibrahimi, vice-chairman of parliament's national security and foreign policy committee, was quoted as saying by the semi-official Fars news agency.
Parliament is pushing for the export ban to deny the EU a six-month phase-in of the embargo on Iran's oil, which the bloc agreed on Monday as part of a raft of tough new Western sanctions aimed at forcing Iran to curb its nuclear programme.
The EU accounted for 18 percent of Iranian crude oil sales in the first half of 2011, according to the US Energy Information Administration (EIA), making it Iran's second-biggest customer after China.