The IEA’s closely watched report comes shortly after the reintroduction of US sanctions against Iran, which from November will also include oil exports, CNBC reported.
“As oil sanctions against Iran take effect, perhaps in combination with production problems elsewhere, maintaining global supply might be very challenging and would come at the expense of maintaining an adequate spare capacity cushion,” the Paris-based organization said Friday.
“Thus, the market outlook could be far less calm at that point than it is today,” the IEA added.
International benchmark Brent crude traded at around $71.43 on Friday morning, down around 0.9 percent, while US West Texas Intermediate (WTI) stood at $66.40, off more than 0.6 percent.
On Tuesday, US President Donald Trump’s administration reinstated sanctions targeting the Iranian government’s purchase of US dollars, Tehran’s trade in gold and other precious metals, and it’s automotive industry.
Trump also warned that unless Iran — which is a member of the Organization of the Petroleum Exporting Countries (OPEC) — complies with US demands, Washington will look to impose far tougher measures in early November.
The second batch of potentially more damaging sanctions will target Iran’s port operators, as well as its energy, shipping and shipbuilding industries. Petroleum-related transactions and dealings between foreign financial organizations and the Central Bank of Iran will also be impacted.
“As we say in the report, although things may be cooling down a little bit right now, we cannot get away from the fact that later in the year … we could be in a different situation where supply may be more constrained and there would then perhaps be a risk of the oil price increasing,” said Neil Atkinson, the head of the oil industry and markets division at the IEA.
The last time Iran was sanctioned, about half its current oil exports of some 2.4 million barrels were removed from the market. However, this time around, many energy analysts believe sanctions will remove far less, maybe around half the prior amount, but some onlookers have recently raised their expectations amid signs some companies are complying with tough talk from the White House.
Any reduction in Iranian crude exports will depend on whether major buyers of its oil in Asia receive sanctions waivers. Meanwhile, China — the world’s biggest buyer of Iranian crude — has said it will defy Trump’s calls on November 4.