News ID: 233159
Published: 0244 GMT October 22, 2018

Saudi Arabia: Producers cannot cover loss of Iran crude

Saudi Arabia: Producers cannot cover loss of Iran crude
REUTERS

Economic Desk

Zanganeh advises Trump to forgo Iran oil sanctions   

Oil producers cannot make up for the shortfall in the global market when the US sanctions on Iranian oil exports come into force next month, the Saudi energy minister said Monday as Iran warned its crude cannot be replaced by other oil producing countries.

“If three million barrels per day disappears, we cannot cover this volume. So we have to use oil reserves,” Khalid al-Falih told Russia’s TASS news agency.

Falih said that with sanctions on Iran coming into full force in November, there was no guarantee oil prices would refrain from going higher.

“I cannot give you a guarantee, because I cannot predict what will happen to other suppliers,” Falih said, when asked whether the world can avoid oil hitting $100 per barrel again.

He said that if oil prices went up, it would slow the global economy and trigger a recession.

“We have sanctions on Iran, and nobody has a clue what Iranians’ exports will be. Secondly, there are potential declines in different countries like Libya, Nigeria, Mexico and Venezuela,” he said.

Falih said Saudi Arabia would soon raise output to 11 million barrels per day (bpd) from the current 10.7 million. He added that Riyadh had capacity to increase output to 12 million bpd and its Persian Gulf OPEC ally, the United Arab Emirates, could add another 0.2 million bpd.

“We have relatively limited spare capacities and we are using a significant part of them,” he said.

Global supply next year could be helped by Brazil, Kazakhstan and the United States, he added.

“But if you have other countries to decline in addition to the full application of Iran sanctions, then we will be pulling all spare capacities,” Falih said.

 

No replacement

Iranian Oil Minister Bijan Zanganeh said Monday his country’s crude output cannot be replaced by other oil producers if Tehran is hit by sanctions, advising US President Donald Trump to forgo reimposing sanctions.

“As I have repeatedly said there is no replacement for Iranian oil in the market. Saudi Arabia and Russia’s output is near their highest level ever and they have no spare capacity to pump more to replace Iran’s oil,” Zanganeh told Shana.

In May, Trump pulled out of the 2015 international nuclear deal with Iran and announced sanctions against OPEC’s third-largest producer Iran. Washington is pushing allies to cut imports of Iranian oil to zero and will reimpose sanctions on Iranian oil and financial sectors in November.

It is also encouraging other oil producers such as Saudi Arabia, other OPEC members and Russia, to pump more to meet any shortfall.

But Iran has repeatedly said that its oil exports cannot be reduced to zero because of high demand levels in the market. Under sanctions, Iran’s oil exports could fall by as much as two-thirds, straining oil markets.

“The market’s knowledge of this inability has raised the prices as the average price (of crude) ... Rising oil prices have slowed down the economic growth of most of the consumer countries, which is affecting the global economy,” Zanganeh said.

He advised Trump “to forgo imposition of sanctions on Iran’s oil exports”, saying that the non-OPEC producers of oil were also unable “to offset disruptions in the market”.

Iran has warned that if it cannot sell its oil due to US pressure, then no other regional country will be allowed to do so either.

Under the 2015 nuclear deal, most international sanctions against Tehran were lifted in 2016 in exchange for Iran curbing its nuclear program.

Reuters contributed to this story.

 

 

 

   
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