LONDON (Dow Jones Newswires), Feb. 20, 2012
Oil markets could cope with any loss of Iranian oil exports tied to sanctions, including an abrupt cut to the European Union, a top official with the International Energy Agency said Monday.
But the consumer watchdog warned the standoff between Iran and the West was bringing the burden of high oil prices on the global economy to near levels last seen in 2008.
In an interview with Dow Jones Newswires, Didier Houssin, IEA director for energy markets and security, said that "there are alternative supplies that can make up for any loss of Iranian exports."
In the second half of this year, any loss of Iranian oil supplies should be compensated by additional spare capacity in the United Arab Emirates, Nigeria and possibly Saudi Arabia and higher production in countries outside the Organization of Petroleum Exporting Countries, he said.
Refiners in the EU have started reducing oil imports from Iran ahead of a ban on July 1. With Asian buyers limiting their exposure to the Islamic Republic to avoid being targeted by U.S. banking sanctions, Iran may have to curb exports altogether.
Iran--which normally exports 2.2 million barrels a day of crude--has already cut supplies to France and the U.K. and has threatened to halt supplies to other EU member states. But even if it happens the "impact of such move will be extremely limited," Houssin said, notably because many refineries will stop producing due to maintenance.
In retaliation to pressure on its nuclear program, Iran has also warned it may block the Strait of Hormuz, through which transits one-fifth of global oil supply.
"The IEA stands ready to react if there is a major supply disruption which is not the case" for now, Houssin said, adding that "most experts...don't think any interruption could be protracted," he said, as Iran itself would suffer.
Still, the threat has been reflected in higher prices, pushing the cost of oil at levels dangerous for the world economy, he said.
"Our indications is that the share of the oil cost compared to the [global gross domestic product] has reached a level close to 2008," he said.
At the time, a spike in oil prices to $147 a barrel was partly blamed for worsening the global recession. Prices earlier Monday rose above $121 a barrel in London on new fears about Iranian supply.
"This [current] level of price could represent a risk to the global economic recovery," Houssin said.
Copyright (c) 2012 Dow Jones & Company, Inc.
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