Imposing sanctions against oil producing states like Iran will have an adverse impact on oil markets as well as the world's economy, the country's former governor at the Organization of Petroleum Exporting Countries said.
"Even if there are enough oil supplies, the continuation of unilateral sanctions will harm all countries, especially OPEC members, as it is very likely that they will face the same trade and economic restrictions under the excuse of safeguarding their national interests," Javad Yarjan was also quoted as saying by Shana.
"OPEC and non-OPEC members should not follow US foreign policies, as it will further destabilize global economy and oil trades," he added.
According to the official, preserving unity among OPEC members is an effective way to guarantee reasonable oil price.
"Fundamental disagreements in the upcoming meeting of half-a-century old organization on Sept. 23 over raising output to offset barrels removed from the market by US sanctions against Iran will be to the detriment of not only suppliers but also customers," he said, adding that the more global oil market is politicized, the more world economic growth will be hurt due to higher prices.
The official believes that oil market should remain apolitical.
Asked about Saudis' capacity to compensate global crude deficit in November when the last round of US sanctions will be imposed on Iran's oil sector, he noted, "They have never assured the US that they can ease the shortage."
Underlining Saudi Arabia's massive investment in oil industry, Yarjan added that the country is extracting as many as 10.5 million barrels a day and even if it raises its output to 12.5 million bpd, it cannot persist over a long time because it will have a detrimental effect on OPEC's spare capacity for market management in critical situations.
Spare Capacity
Spare capacity is the volume of production that can be brought on within 30 days and sustained for at least 90 days.
"OPEC spare capacity provides an indicator of the world oil market's ability to respond to potential crises that reduce oil supplies," he said, adding that oil prices tend to incorporate a rising risk premium when OPEC spare capacity reaches low levels.
According to Yarjan, forecasting short-term crude oil prices is very complicated, as the market is influenced by an array of key contributors like supply and demand, reservoir volume and geopolitical issues like political conflicts and wars.
Saudi Arabia has to balance oil supply and demand, and it has to stabilize oil prices so they do not rise too much before the US elections. The policy is political, because Saudis do not want to pump too much oil so that Iranians complain to OPEC that Saudi Arabia is taking over their market share. They also do not want oil prices to fall too much.
On Russian oil companies' capacity, he noted that although they have doubled their output in the last 18 years, standing at 11 million bpd, it is very unlikely that they can increase production by 200,000 bpd as they are under sanctions, so when they claim that they are capable of doing so, it is no more than a baseless bluff.
OPEC Concerns
OPEC is concerned by threats to crude supply from large producers such as Iran, the group’s secretary-general, Mohammad Barkindo, said.
Unilateral US sanctions on oil sales by Iran, OPEC’s third-biggest supplier, take effect on Nov. 4.
Iran’s crude exports are already falling, as the US prepares to curb Tehran’s ability to sell oil and participate in global financial markets.
Iran is a “very important producer and exporter” of oil, the group’s top official said at an event in the UAE city of Fujairah.
“When you have major producers facing supply challenges, it is of concern” for OPEC and consumers alike, he added.
Crude is averaging about $72 a barrel this year, and the International Energy Agency warned last week that prices could rise above $80 unless producers compensate for lost supply from OPEC members Iran and Venezuela.
