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Dubai (AFP) – While Washington is on the verge of reducing Iranian oil exports, Saudi Arabia, an OPEC heavyweight, and its partners are ready to increase their supplies even though the conditions of the market remain uncertain, analysts say.
The renewal of sanctions on the Islamic Republic comes at a time of severe disruption of supply in several producing countries and, while the President of the United States, Donald Trump, intends to prevent a rise in oil prices.
Analysts estimate that Iranian oil exports, which reach about 2.5 million barrels a day in normal times, will fall from one million to two million bpd when the sanctions come into effect on November 5th.
This should weigh heavily on an already tense market.
Failures in Libya, Venezuela, Nigeria, Mexico, Angola and other countries forced OPEC producers and other countries to abandon the agreed reduction in production in June and to stimulate supplies.
"We are entering a crucial period for the oil market," said the International Energy Agency in a September report. "Things are tightening."
– Available capacity in Arabia –
Saudi Arabia is the only producer with a large spare capacity of about two million bpd that can be exploited to offset the loss of Iranian stocks.
The kingdom has been under surveillance since Saudi journalist Jamal Khashoggi – the former royal court insider turned critical – was murdered at his country's consulate in Istanbul in October.
Even as relations between the West and Riyadh have deteriorated over the murder of the Washington Post contributor, Saudi Arabia has stated that it is not planning to set up a oil embargo retaliation.
Saudi Energy Minister Khalid al-Falih said his country, which had increased its output from 700,000 barrels a day to 10.7 million barrels a day in October, was ready to bring production at 12 million barrels a day.
"We have sanctions against Iran and no one has any idea what Iran's exports will be," he told the Russian news agency Tass last week.
In addition, there are potential declines in Libya, Nigeria, Mexico and Venezuela, he added, also citing uncertainty over American shale oil production.
Falih said the kingdom could use its huge strategic reserves of about 300 billion barrels to meet global demand.
Anas al-Hajji, a Houston-based oil expert, said the fall in Iranian exports was hard to gauge, but he was expecting "less than most analysts are talking about".
"The Iranians have perfected their game by working under sanctions.There will be a black market for Iranian crude," Hajji told AFP.
The neighboring Saudi Arabian Emirates and Kuwait can also increase their production by 300,000 b / d if necessary.
– & # 39; C & # 39; is unsustainable & # 39; –
Kamel al-Harami, a Kuwaiti oil expert, doubts that Riyadh can maintain its output of 12 million bpd for an extended period.
"It's very unlikely … They've never done 11 million bpd on a sustainable basis … This is not sustainable," Harami said.
OPEC is constrained by the low reserve capacity available in a tight market, threatened by unexpected outages, low investment and unpredictable geopolitical unrest.
Iranian officials are banking on unstable market conditions to defeat US sanctions.
"Trump is trying both to significantly reduce Iran's oil exports and also wants prices to go up, and these two factors can not be combined," said Iranian Oil Minister Bijan Namdar Zanganeh. end of September.
Tehran sold oil to private buyers through its energy exchange for the first time on October 28, as part of efforts to counter the imminent return of sanctions.
Some estimates show that exports of Iranian crude have already fallen by a third since May, even traditional customer businesses such as China and India having abandoned their purchases.
Hajji said that he thought the market was well supplied and that Saudi Arabia did not need to exceed the production of 11 million bpd.
"They (Saudis) have a capacity of 12 million bpd, but Saudi Arabia does not need to use all its unused capacity," he said.
"People forget that demand fell in the first quarter compared to the fourth quarter and that the IEA predicts a drop of one million bpd," said Hajji.
Oil prices, which rose from less than $ 30 a barrel in early 2016 to a high of over $ 86 a barrel at the beginning of the last four years, have fallen to about $ 75 a year due to fears of oil. 39, a decline in global demand.
Oil prices slid Tuesday as the market took into account concerns over potential supply disruptions following Falih's comments suggesting that output would remain high.
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