Our Network

Register for our free newsletter

 
 
Latest News

Saudis Ready To Replace Iran Crude – Sources

Industry sources said on Tuesday No. 1 oil exporter Saudi Arabia and other Gulf OPEC states were ready to replace Iranian oil if further sanctions halt Iranian crude exports to Europe.

0

December 28, 2011 12:46 by



Iranian Oil Minister Rostam Qasemi had said that Saudi Arabia had promised not to replace Iranian crude if sanctions were imposed.

“No promise was made to Iran, its very unlikely that Saudi Arabia would not fill a demand gap if sanctions are placed,” an industry source familiar with the matter said.

Gulf delegates from the Organization of the Petroleum Exporting Countries (OPEC) said an Iranian threat to close the Strait of Hormuz would harm Tehran as well as the major regional producers that also use the world’s most vital oil export channel.

“If the sanctions take place, the price of oil in Europe would increase and Saudi and other Gulf countries would start selling there to fill the gap and also benefit from the higher price,” said a second industry source who declined to be named.

Brent crude oil futures jumped nearly a dollar to over $109 a barrel after the Iranian threat, but a Gulf OPEC delegate said the effect could be temporary. “For now, any move in the oil price is short-term, as I don’t see Iran actually going ahead with the threat,” the delegate told Reuters.

The industry source said that in the case of EU sanctions, Iran would most likely export more of its crude to Asia, while Gulf states would divert their exports to Europe to fill the gap until the market is balanced again.

A prominent analyst said that if Iran did manage to shut down the Strait of Hormuz, the ensuing spike in oil prices could wreck the global economy, so the United States was likely to intervene to foil such a blockade in the first place.

“First, the U.S. will probably not allow Iran to close the Strait. That’s a major economic thoroughfare and not just for oil. You shut that Strait and we are talking a major hit on many Middle East economies,” said Carl Larry, president of Oil Outlooks in New York.

“Second, there is no way that the Saudis (alone) have enough oil or quality of oil to replace Iranian crude. Figure Saudi spare capacity is 2 to 4 million at best. Of that spare, about 1-2 million is real oil that is comparable out of Iran. Lose Iran, lose 3.5 million barrels per day of imports. No way.”

French President Nicolas Sarkozy proposed hitting Iran with an oil embargo and won support from Britain, but resistance persists within and outside the European Union.

An import ban might raise global oil prices during hard economic times and debt-strapped Greece has been relying on attractively financed Iranian oil.

Iran’s seaborne trade is already suffering from existing trade sanctions, with shipping companies scaling down or pulling out as the Islamic Republic faces more hurdles in transporting its oil. (Additional reporting by Parisa Hafezi in Tehran, Dmitry Zhdannikov in London, Robert Gibbons and Janet McGurty in New York, Amena Bakr in Dubai; Writing by Mark Heinrich, Editing by Jon Boyle)



0

Leave a Comment