Saudi Arabia has said it will take all necessary measures to prevent supply shortages following the US withdrawal from the Iran nuclear deal.
“The Kingdom will work with major oil producers within and outside OPEC, and with major consumers as well to limit the impact of any shortages in supplies,” an official spokesman of the Ministry of Energy, Industry and Mineral Resources said in a statement late Tuesday.
“Saudi Arabia remains committed to supporting the stability of oil markets for the benefit of producers and consumers and for sustaining growth in the global economy,” it said.
Later, in a tweet Khalid al-Falih, Saudi Arabia’s Minister of Energy, Industry and Mineral, said he is “in close contact with OPEC ’s Presidency, Russia and the US , and will be connecting with other producers and major consumers over the next few days to ensure market stability”.
Following the US withdrawal from #IranDeal , I would like to confirm our commitment to oil market stability for the benefit of producers & consumers, #Saudi will work closely with major OPEC, non-OPEC producers & with key consumers to mitigate the effects of any supply shortages.— خالد الفالح|Khalid Al Falih (@Khalid_AlFalih) May 9, 2018
Oil prices rose more than 3 percent on Wednesday, hitting 3-1/2-year highs, after US President Donald Trump abandoned the nuclear deal with Iran and announced the “highest level” of sanctions against it.
Brent crude oil touched its highest since November 2014 at $77.20 a barrel. The benchmark contract was up $2.00 a barrel, or more than 2.6 percent, at $76.85 by 0930 GMT. US light crude was up $1.90 a barrel, or almost 2.8 percent, at $70.96, near highs also last seen in late 2014.
In China, the biggest single buyer of Iranian oil, Shanghai crude futures hit their strongest in dollar terms since they were launched in late May.
“Iran’s exports of oil to Asia and Europe will almost certainly decline later this year and into 2019 as some nations seek alternatives in order to avoid trouble with Washington and as sanctions start to bite,” said Sukrit Vijayakar, director of energy consultancy Trifecta.
Walking away from the deal means that the United States will likely re-impose sanctions against Iran after 180 days, unless some other agreement is reached before then.
Analysts’ estimates of the possible reduction in Iranian crude supplies as a result of any new US sanctions range from as little as 200,000 bpd to as much as 1 million bpd, with most impact from 2019 as sanctions take time to be imposed. Several refiners in Asia said on Wednesday they were seeking alternatives to Iranian supplies.
“The oil supply/demand balance is roughly in balance now, but it could turn to a complete supply shortage (in case of new supply curbs). Oil prices could rise at least $10, with Brent approaching near $90,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting.
(With Saudi Gazette inputs)