KUALA LUMPUR: The global oil market is well supplied and can cope with the loss of Iranian crude to Western sanctions, oil officials and executives, including the heads of Total and Royal Dutch Shell, said this week.
An increase in global crude supplies and falling crude prices have helped cushion the impact of sanctions targeting Iran’s controversial nuclear programme.
“The market is well supplied. There is no shortage,” the head of French oil firm Total said at a conference here when asked if he was concerned about the loss of Iranian supply on the oil market.
Total’s chief executive Christophe de Margerie added that Brent crude prices had seen “a very important decrease”.
Brent crude was trading just under US$99 per barrel today after dropping to a 16-month low below US$96 a barrel earlier this week.
Troubles in the euro zone have overshadowed the tensions between the West and Iran, Opec’s second-largest oil producer, after Brent prices hit a record high of US$128 a barrel in March.
Speaking at the same conference, Royal Dutch Shell CEO Peter Voser said oil prices will weaken further in the second half of this year as demand reacts to a slowing global economy, while international political tensions were fading.
“Global demand is softening, we have got recessionary elements in Europe, a small slowdown in Asia Pacific,” Voser told Reuters in an interview earlier this week.
“At the same time, some of the geopolitical elements of price volatility over the past few months have kind of receded, and therefore we see a softening of prices which I expect to go well into the second half of this year.”
Ahead of a meeting of the Organisation of Oil Exporting Countries (Opec) next week, Algerian Oil Minister Youcef Yousfi also said the market could cope with a drop in Iranian supply.
“Yes, there is enough oil in the market,” the minister said when asked whether there is sufficient crude to offset the impact of Western sanctions on Iranian exports.
An increase in global crude supplies and falling prices put the market in a better position, said Daniel Yergin, IHS CERA chairman and author of the Pulitzer winning work “The Prize: The
Epic Quest for Oil, Money, & Power”.
“This is a very powerful flotilla of sanctions that are heading towards Iran, it’s never been this powerful,” he 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.”
Top oil exporter Saudi Arabia has boosted output to the highest level in decades to cool global oil prices and cover any supply disruption.
Increased US supplies have made more oil available to the world’s top consumer, cutting its import needs, and 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.
Asia cuts Iran imports
China, Japan, India and South Korea have already cut their imports by about a fifth from the 1.45 million barrels per day (bpd) they were buying a year ago as they prepare for the US financial sanctions to come into effect.
The United States will announce a new list of countries that will receive exceptions from sanctions as soon as early next week, a government official had said, although it may withhold waivers for China and Singapore.
Time is running out for Asian buyers to come up with ways to keep imports flowing without falling foul of the toughest Western sanctions to date against Tehran’s oil trade. Solutions have proved elusive so far.
Malaysia’s Petronas, one of the smaller Iranian crude buyers, is buying alternative grades from West Africa and other Gulf suppliers.
“We’ve got our sources. As long as we can get the right quality, the right type of oil for our refineries we’re okay,” said Wan Zulkiflee Wan Ariffin, Petronas’s chief operating officer and executive vice-president of downstream.
Petronas stopped importing some 50,000-60,000 barrels per day of Iranian crude for its Malacca refinery and the majority-owned Engen refinery in South Africa in April, company officials had said.