DUBAI • With Washington poised to curtail Iran's oil exports, Opec heavyweight Saudi Arabia and its partners stand ready to ramp up supplies even as market conditions remain uncertain.
The renewal of sanctions on Iran today comes at a time of major supply disruptions in several producer nations and as United States President Donald Trump aims to prevent an oil price hike.
Mr Trump decided in May to withdraw the US from the 2015 nuclear deal between Iran and world powers and reimpose sanctions on Teheran. The deal brought about the lifting of most international financial and economic sanctions on Iran in return for Teheran curbing its disputed nuclear activity under United Nations surveillance.
Iranians yesterday protested against the move, chanting "Death to America" as they marked both the anniversary of the seizure of the US Embassy during the 1979 Islamic Revolution and the return of sanctions. Hardline students stormed the embassy on Nov 4, 1979, soon after the fall of the US-backed Shah, and 52 Americans were held hostage there for 444 days.
Iran's oil exports, which reach around 2.5 million barrels per day (bpd) in normal times, are likely to plunge by one million to two million bpd when sanctions take effect, said analysts. That is expected to strain an already tight market.
Saudi Arabia is the only producer with significant spare capacity of around two million bpd that can be tapped to compensate for the loss of Iranian supplies.
The kingdom has been under scrutiny since Saudi journalist Jamal Khashoggi - the former royal court insider-turned-critic - was killed in his country's consulate in Istanbul last month. Even as relations soured between the West and Riyadh over the murder of the Washington Post contributor, Saudi Arabia said it had no plans to wage a retaliatory oil embargo.
Saudi Energy Minister Khalid al-Falih said his country, which raised output by 700,000 bpd to 10.7 million bpd last month, was prepared to further bump up production to 12 million bpd. He said the kingdom could turn to its huge strategic reserves of around 300 billion barrels to meet global demand.
The United Arab Emirates and Kuwait can also raise their output by up to 300,000 bpd if needed.
But Kuwaiti oil expert Kamel al-Harami said he doubted Riyadh could sustain production of 12 million bpd for a prolonged period.
The Organisation of Petroleum Exporting Countries (Opec) is constrained by low spare capacity in a tight market under threat from unplanned outages, low investment and unpredictable geopolitical unrest. Oil prices, which rebounded from under US$30 a barrel in early 2016 to a four-year high of over US$86 a barrel early last month, have fallen to around US$75 due to fears of weaker global demand.
Iranian officials are betting on the unstable market conditions to beat US sanctions. Iranian Oil Minister Bijan Namdar Zanganeh said in late September: "Mr Trump both tries to decrease Iran's oil exports significantly and also wants prices not to go up. These two can't happen together."
US-based oil expert Anas al-Hajji said the fall in Iranian exports was tough to assess but he expected "less than what most analysts are talking about". "The Iranians have perfected their game working under sanctions. There will be a black market for Iranian crude."
AGENCE FRANCE-PRESSE, REUTERS