US Sanctions against Iran will Pressure Global Oil Supply

The US plan to impose sanctions against Iran. targeting the country’s crude exports. could have a significant impact on the global supply. while consuming the world’s spare oil capacity. the International Energy Agency (IEA) warned on Friday.

`As oil sanctions against Iran take effect. perhaps in combination with production problems elsewhere. maintaining global supply might be very challenging and would come at the expense of maintaining an adequate spare capacity cushion.` the IEA said. adding that “the market outlook could be far less calm at that point than it is today.“

The organisation’s closely watched report came after the re-imposed US sanctions against Iran took effect this week. targeting the country’s purchases of US dollars. in which oil is traded. among other industries.

Moreover. another more impacting raft of sanctions would target Iran’s oil and gas industry. hitting its crude exports. related industries such as shipbuilding. and petroleum-transactions between foreign financial entities and the country’s central bank. unless Tehran complies with Washington’s demands.

In the short term. supply is not seriously impacted. given that Saudi Arabia. Russia ramped up their oil production. oil industry and markets division head Neil Atkinson told CNBC on Friday.

However. “as we say in the report. although things may be cooling down a little bit right now. we cannot get away from the fact that later in the year … We could be in a different situation where supply may be more constrained and there would then perhaps be a risk of the oil price increasing.` Atkinson added.

Despite the European Union (EU). India and China opposed the reinstatement of US sanctions. many countries are set to yield for the White House’s pressure.

As far as escalating trade tensions are concerned. the risks of economic growth slowdown have further increased. the Paris-headquartered agency said. adding however. that`the threat of trade disruption could recede as fast as they are mounting.“ “It is difficult at this stage to make adjustments to our base case assumptions for the economy and oil demand.“ the IEA said.

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