The market will never buy Saudi Arabia's claim that it has been compensating for the loss of Iran's oil exports, Iranian Oil Minister Bijan Zanganeh said on Monday, adding that Saudi Arabia officials have been claiming they are able to offset Iranian losses under U.S. pressure.
"Such brags would only satisfy Mr. Trump but the market would never buy such a claim," Iran's oil ministry's news service Shana quoted Zanganeh as saying, in response to last week's remarks by Saudi Crown Prince Mohammed bin Salman that the Saudis were offsetting Iranian losses and even more.
In an interview with Bloomberg last week, Crown Prince Mohammed said that:
"[A]ctually the request that America made to Saudi Arabia and other OPEC countries is to be sure that if there is any loss of supply from Iran, that we will supply that. And that happened. Because recently, Iran reduced their exports by 700,000 barrels a day, if I'm not mistaken. And Saudi Arabia and OPEC and non-OPEC countries, they've produced 1.5 million barrels a day. So we export as much as 2 barrels for any barrel that disappeared from Iran recently. So we did our job and more," MBS told Bloomberg.
According to the Saudi Crown Prince, the higher price of oil over the past month was not the result of the sanctions on Iran, but rather the consequence of lower production in other countries, including Canada, Mexico, Libya, and Venezuela.
In reaction to the Saudi claim, the oil minister of Iran-which continues to insist that its export can't be completely halted-said, as quoted by Shana:
"It seems that such remarks were made under U.S. pressure on Saudi authorities; otherwise in reality, neither Saudis nor any other countries could replace Iran's exports." Related: US Demands For More Oil Could Backfire
According to the Iranian minister, the higher Saudi supply to the market in recent weeks is the result of tapping its oil inventories rather than tapping into its spare capacity.
"The market and rising prices are the best evidence of concern that the market is in short supply and is rightly nervous about the severe shortage of oil in the coming months," Zanganeh was quoted as saying.
Iran's crude oil exports started to noticeably fall in August, continued their decline in September, and the latest tanker tracking data suggests that early October exports are further down from last month. Oil prices, however, fell by more than 1 percent early on Monday morning, on reports that the U.S. Administration might be considering waivers for countries that have been cutting their Iranian oil purchases.
By Tsvetana Paraskova for Oilprice.com
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Comments
Neither OPEC nor Saudi Arabia plus Russia have the spare production capacities to be able to offset a hypothetical loss of Iranian crude oil exports. Saudi Arabia and Russia could not raise their production significantly beyond the 650,000 barrels a day (b/d) which Saudi Arabia (400,000 b/d) and Russia (250,000 b/d) combined have already added two months ago. Even the 400,000 b/d that Saudi Arabia added to the market did not come from a new production but from oil stored on board tankers and on land.
Moreover, there is no evidence that Iranian crude oil exports have declined as a result of the impending sanctions. Those who are claiming otherwise should provide proofs otherwise their claims will be depicted as a straight lie, or wishful thinking or part of a concerted efforts by vested interests to give the impression that the threat of US sanctions has succeeded in reducing Iranian oil exports even before the sanctions were implemented.
A week ago, Bloomberg, Goldman Sachs and other investment banks and analysts of different shapes and sizes claimed that India is going to cut its crude oil imports from Iran. It transpired, however, that India will buy a total of 9 million barrels of oil from Iran in November even after the US sanctions are implemented.
The Trump administration is deluding itself when it says that it expects Iranian oil buyers to bring their purchases down to zero or sanctions will be imposed on them.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London