‘Safety valve’ Saudi Arabia can make up for lost Iranian oil
Saudi Arabia is more than capable of compensating for lost Iranian oil exports, following the move by the US administration to end waivers to sanctions on Tehran.
Iran crude-oil exports hit some 1.7 million barrels per day (bpd) in March, with 613,000 bpd going to China and 97,000 to Turkey, two of the countries subject to the sanctions waivers that expire on May 2.
With the return of the sanctions on Iran, crude oil exports from the country will supposedly drop to zero.
Saudi Arabia’s maximum potential oil production is around 12 million bpd, while output today stands at 9.8 million bpd.
Saudi Arabia, as the world energy industry’s only safety valve, is the only oil producer that can compensate for the loss of Iranian barrels. Historically, the Kingdom has successfully proven its ability to maintain balance in the global markets, absorbing any supply shock caused by geopolitical or technical factors.
Saudi Arabia’s maximum potential oil production is around 12 million bpd, while output today stands at 9.8 million bpd. Therefore, the Kingdom can compensate for any loss of Iranian exports by going back to previous output levels, and without even hitting the maximum capacity.
Saudi Arabia’s great oil upstream infrastructure and export facilities mean it can be flexible in its production. In the previous five months, output has fluctuated by about 1.3 million bpd, from 11.1 million bpd to 9.8 million bpd. The country can easily ramp up production by 1 million bpd — meaning it is more than capable of seeing through its pledge to ensure an adequate crude supply and balanced market.
- Faisal Mrza is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter: @faisalmrza