KUALA LUMPUR: The world has enough oil supply to cover any fall in crude exports from Iran ahead of Western sanctions that will start later this month, Algerian Oil Minister Youcef Yousfi said.
Yousfi’s comments about fellow OPEC member Iran come ahead a meeting of the producer group next week, and as other members of the cartel step up production to cover for a potential shortfall in Iranian crude exports.
“Yes, there is enough oil in the market,” the minister said when asked whether there is enough crude to offset the impact of Western sanctions on Iranian exports.
Saudi Arabia has boosted output to the highest level in decades, with total OPEC oil output in May at its highest since 2008.
Benchmark Brent crude traded just above $100 yesterday, down from a high of over $128 in March, making alternatives cheaper for Iran’s big oil buyers in Asia and elsewhere.
Yousfi also said Algeria plans to boost liquefied natural gas exports to 40 billion cubic meters (bcm) in two to three years, up from 27 bcm currently.
The country is building two new LNG plants with a total capacity of 11-12 million tons per year (tpy) which will start operating in the next 1-2 years, he said.
Also yesterday, energy industry expert Daniel Yergin said rising global crude supplies and falling prices will cushion the impact on the global economy of Western sanctions aimed at curbing Iran’s nuclear program.
“This is a very powerful flotilla of sanctions that are heading toward Iran, it’s never been this powerful,” Daniel Yergin, IHS CERA chairman and author of the pullitzer winning work “The Prize,” said.
“What makes a big difference is that there is alternative oil in the market. There is a very concerted effort to ensure that alternative supply that will come into the market to enable the sanctions to work.”
More supply was also coming from Iraq as international oil companies develop giant fields there and from Libya as the country recovers from civil war, he added.
Output from tight oilfields in the United States had also increased supply in the world’s top consumer by 600,000 bpd to 700,000 bpd, he said, cutting import needs. Inventories in the US recently hit their highest level since 1990.
Asian buyers of Iranian crude are running out of time to find ways around Western sanctions that aim to reduce oil revenues for the Islamic Republic. Iran exports most of its crude to China, Japan, India and South Korea, who have already cut purchases by about a fifth from the 1.45 million barrels per day they were buying a year ago.
Imports will fall even more if they fail to find a way around the biggest headache — an EU ban on insuring shipments of Iran’s oil. Still, lower oil prices will undermine the argument among consumers that the loss of Iranian crude could harm economic growth.
“Prices have come down and that really takes pressure off the economies and it’s helpful to economic growth and recovery,” Yergin said.
The sanctions have pushed Iran to open talks with the West on its nuclear program.
“This is really a very large chess game that’s been played out and Iran will have to decide, is there some point that they are willing to make a deal that will be satisfactory to the Western European countries and the United States on its nuclear program?” Yergin said.
Iran’s crude stockpile is on the rise as exports drop, Yergin said.
“We know that some of it is going into storage — several hundred thousand barrels a day,” Yergin said.
Iran will be looking to sell its oil at steep discounts as the sanctions eat away at exports, he added.
Any resolution between the West and Iran over its nuclear program would depress oil prices as Iran sells stored oil, force other producers to reduce output, he said.