DUBAI: Top oil exporter Saudi Arabia and other Gulf OPEC states are ready to replace Iranian oil if further sanctions halt Iranian crude exports to Europe, industry sources said on Tuesday.
Iran’s Oil Minister Rostam Qasemi had said that Saudi Arabia had promised not to replace Iranian crude if sanctions are imposed.
"No promise was made to Iran, its very unlikely that Saudi Arabia would not fill a demand gap if sanctions are placed," an industry source familiar with the matter, who declined to be named, told Reuters.
Gulf delegates from the Organization of the Petroleum Exporting Countries said an Iranian threat to close the Strait of Hormuz would harm Tehran as well as the major regional producers that also use the most important oil export channel in the world.
Iran’s first vice-president warned on Tuesday that the flow of crude will be stopped through Hormuz if foreign sanctions are imposed on its oil exports, the country’s official news agency reported.
Most of the crude exported from Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq – and nearly all the liquefied natural gas from top exporter Qatar – must slip through a 4-mile (6.4 km) wide shipping channel between Oman and Iran.
But Saudi Arabia can export a portion of its oil through the Red Sea.
European Union leaders have called for more sanctions against Iran by the end of January but have made no explicit call for an embargo on Iranian crude imports.
The bloc is considering an embargo on Iranian oil exports that would block the sale of about 450,000 barrels a day from Iran into the EU.
"If the sanctions take place, the price of oil in Europe would increase and Saudi and other Gulf countries would start selling there to fill the gap and also benefit from the higher price," said a second industry source who declined to be named.
Benchmark US crude oil futures jumped nearly a dollar to over $100 a barrel after the Iranian threat, but a Gulf OPEC delegate said the effect could be temporary.
"For now any move in the oil price is short term, as I don’t see Iran actually going ahead with the threat," the delegate told Reuters.
The industry source said that in the case of EU sanctions, Iran would most likely export more of its crude to Asia, while Gulf states would divert their exports to Europe to fill the gap until the market is balanced again.
However in Asia, China is already driving a hard bargain. China’s top refiner Sinopec Corp said it would cut its January crude imports from Iran by half, in attempt to discount prices, trade sources told Reuters in December.
A long-term disruption in the volume of supplies China buys would strengthen the impact on Iran of new US and EU sanctions.
Industry sources believe the dispute will likely be short lived, as Iran would back down if it fears it will lose market share in China.
