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U.S. Officials Say the Oil Market Can Withstand No Iranian Exports This Year

CommoditiesMar 15, 2019 02:20PM ET
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© Bloomberg. The crude oil tanker 'Devon' sails through the Persian Gulf towards Kharq Island to transport crude oil to export markets in the Persian Gulf, Iran, on Friday, March 23, 2018. Photographer: Ali Mohammadi/Bloomberg

(Bloomberg) -- U.S. officials said the global oil market can withstand the removal of all Iranian crude exports this year, a conclusion that could be pivotal in the coming weeks as President Donald Trump weighs whether to end sanctions waivers granted to several nations.

Based on current oil supply and the potential of the U.S. and Saudis to ramp up production, “going to zero” could happen this year without compromising affordable crude supplies, according to four officials who spoke on condition of anonymity to discuss internal deliberations. The officials emphasized that the discussions are still underway and no final decision has been made.

President Donald Trump re-imposed sanctions on Iran in November, with the goal of choking off the Islamic Republic’s oil revenue. The administration granted eight countries full or partial waivers allowing them to continue buying the nation’s crude: China, India, Italy, Greece, Japan, South Korea, Taiwan and Turkey. The waivers, which last for 180 days, were meant to be temporary measures to ease their transition from Iranian oil and avoid unsettling the energy market.

As the waivers near their expiration date, the officials said that sufficient spare capacity exists to make up for the loss of all Iranian oil barrels. They cited OPEC’s ability to ramp up production as well as booming U.S. output, among other possibilities.

According to the International Energy Agency, OPEC has 2.8 million barrels a day of spare capacity, more than enough to offset Iranian supply losses. Iran exported 1.17 million barrels a day in February, up from a multiyear low of 629,000 barrels a day in December, according to Bloomberg tanker tracking. Meanwhile, the U.S. Energy Information Administration estimates that global crude supply this year will exceed demand by 180,000 barrel a day, according to its Short-Term Energy Outlook.

But future supply losses from Venezuela muddy the picture. The politically beleaguered country saw oil production decline by 100,000 barrels a day in February to 1.14 million, the IEA said. Deeper declines are likely in March, the group said.

“We’re committed to bringing Iranian crude oil exports to zero as quickly as market conditions will permit,” U.S. Secretary of State Mike Pompeo said Tuesday at the CERAWeek by IHS Markit conference in Houston.

U.S. Officials Say the Oil Market Can Withstand No Iranian Exports This Year
 

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