Analysis: More, not less, oil this year despite Iran ban

Thu Jan 26, 2012 6:20am EST
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By Christopher Johnson and Peg Mackey

LONDON (Reuters) - The world is likely to have more oil, not less, this summer even as Europe imposes sanctions on Iran over its nuclear program.

Although Europe's refiners will have to pay up for other sources of oil, they should have little difficulty finding them.

Extra crude oil from Saudi Arabia, Iraq and Libya will more than make up for any lost from Iran after the ban is imposed on July 1, and this is likely to be reflected in oil prices.

As much as 1 million barrels per day (bpd) more crude oil could be coming from these three producers alone - perhaps double the volume of Iranian exports lost to the European Union.

"The oil market should be very well supplied this summer - even better than now," said Samuel Ciszuk, Middle East and North African (MENA) analyst at consultancy KBC Energy Economics.

"Volumes from Iraq should be up significantly, Libya is doing very well and Saudi Arabia will increase production to compensate for some of the lost Iranian barrels."

The International Monetary Fund said on Wednesday sanctions against Tehran would imply supply declines of about 1.5 million bpd from the world's fifth largest oil producer, adding global oil prices could rise as much as 30 percent if Iran halted oil exports as a result of the West's actions.

But senior oil executives, traders and strategists see little chance of significant supply disruption this summer.   Continued...

<p>An attendant holds a petrol nozzle at a petrol pump in the northeastern Indian city of Siliguri August 5, 2008. REUTERS/Rupak De Chowdhuri</p>