Saudi Arabia and Gulf OPEC States Ready to Replace Iranian Oil if Sanctions Halt Exports

Strategic Insights -

Iran's oil minister, Rostam Qasemi, had earlier stated that Saudi Arabia had promised not to replace Iranian crude if sanctions were imposed. However, industry sources close to the matter have disputed this claim, suggesting that Saudi Arabia would indeed fill any demand gap if sanctions are placed. The threat of sanctions has already led to a surge in oil prices, with benchmark US crude oil futures jumping nearly a dollar to over $100 a barrel. Industry sources believe that in the event of EU sanctions, Iran would likely redirect its crude exports to Asia, while Gulf states would divert their exports to Europe to fill the gap until the market is balanced again.

Key Takeaways:

  • Saudi Arabia has made no promise to Iran to not replace its crude oil if sanctions are imposed, according to industry sources.
  • An Iranian threat to close the Strait of Hormuz would harm not only Iran but also major regional producers that use the oil export channel.
  • Iranian oil exports to the EU would be blocked by a proposed embargo, resulting in a loss of approximately 450,000 barrels per day from Iran's exports.
  • Industry sources suggest that Iran would likely redirect its crude exports to Asia if denied access to the EU market.
  • China, a major buyer of Iranian oil, has already reduced its January crude imports from Iran by half in an attempt to discount prices.
  • Industry sources believe the dispute over Iran's oil exports will be short-lived, with Iran likely to back down if it fears losing market share in China.

Statistics:

  • Benchmark US crude oil futures jumped nearly a dollar to over $100 a barrel in response to the Iranian threat.
  • Approximately 450,000 barrels per day of Iranian oil exports to the EU would be blocked by a proposed embargo.
  • China would cut its January crude imports from Iran by half in an attempt to discount prices.
  • A long-term disruption in Chinese oil imports from Iran would strengthen the impact of new US and EU sanctions on Iran.
  • Iran's oil exports account for approximately 2.5 million barrels per day of global oil production.

Sources:

  • Industry source familiar with the matter, who declined to be named, told Reuters.
  • Gulf delegate from the Organization of the Petroleum Exporting Countries.
  • Iranian Oil Minister Rostam Qasemi.
  • Iranian first vice-president.
  • Reuters.
  • Trade sources.
  • Daily NewsEgypt.
  • Syndigate.info.
  • Albawaba.com.