Learn more about Hart Energy Conferences
Get our latest conference schedules, updates and insights straight to your inbox.
The U.S. has talked to large oil producers over ways to increase the supply of crude and offset any impact from the reimposition of sanctions on Iran, Treasury Secretary Steven Mnuchin said.
His comments came as Saudi Arabia pledged to support stability in the oil market and to sustain global growth.
President Donald Trump’s decision to withdraw the U.S. from the international deal over Iran’s nuclear program has stoked fears that renewed sanctions on its oil exports will drive up crude prices, hitting consumers and putting a brake on global growth.
Speaking to reporters in Washington, D.C., Mnuchin suggested there were attempts under way to mitigate any potential risks from a reduction in Iranian oil exports.
“We have had various conversations with various parties about different parties that would be willing to increase oil supply to offset this,” he said.
“My expectation is not that oil prices go higher. To a certain extent, some of this was already in the market, on oil prices.”
Mnuchin declined to name any of the countries that have been talking to the US about possible increases in production, but Saudi Arabia has spare capacity that would allow it to increase output and has been a strong supporter of the U.S. withdrawing from the Iran deal.
The Saudi energy ministry said in a statement on May 8 evening that the kingdom “remains committed to supporting the stability of oil markets, benefiting producers and consumers alike, and to sustaining growth in the global economy.”
It added that it would “work with major producers within and outside of OPEC, as well as, major consumers to mitigate the impact of any potential supply shortages”.
Oil prices were little changed on May 8, with internationally traded Brent about $76/bbl, up about 40 cents.
Prices have been on an upward trend as concerns about the Iran deal withdrawal and other geopolitical issues mounted. Crude has also been supported in part by supply cuts led by OPEC producers and Russia, alongside robust demand boosted by strong economic growth.
The eventual impact of Trump’s decision on oil prices will depend on how effectively the renewed sanctions bite on Iran’s exports. Energy Intelligence, a research company, said it expected Iran’s crude exports to be cut by about 540,000 barrels a day in the fourth quarter of 2018, and 690,000 bbl/d by mid-2019.
However, Paul Sheldon of S&P Global Platts suggested there could be just 200,000 bbl/d of Iranian crude exports at risk by the fourth quarter of this year. He added: “Unilateral enforcement of the current sanctions will be much more difficult than the multilateral measures implemented in 2012.”
Mnuchin told reporters: “We are careful in wanting to make sure we balance supply and demand.” Part of the purpose of offering an extended period of time before the sanctions go fully into effect was to allow other oil producers to bolster production, he added.
Asked about exceptions available for countries that sharply reduced their oil purchases from Iran, Mnuchin declined to quantify what a “significant” reduction would amount to. He said the U.S. wanted to be sensitive to allies who are purchasing energy, petroleum and other products from Iran, giving them time to wind down the existing contracts.
Mnuchin repeatedly stressed that the U.S. objective was to hold discussions seeking a new agreement on Iran. “That is something that would be good for the people of Iran, would be good for protecting the world,” he said.
“One, our objective is to have a new deal. But two, our objective is that we think the wind-down periods allow for more than enough time, that if there is not a deal, the sanctions will take effect and will have an impact.”
The U.S. is also keen for other producers to step in so as not to propel domestic fuel prices, which could trigger a backlash at home. GasBuddy, which monitors petrol prices at the pump, said before Trump’s announcement that widespread sanctions could see prices rise by 25 cents a gallon. The average national price would then breach a $3 a gallon.
Recommended Reading
Endeavor Integration Brings Capital Efficiency, Durability to Diamondback
2024-02-22 - The combined Diamondback-Endeavor deal is expected to realize $3 billion in synergies and have 12 years of sub-$40/bbl breakeven inventory.
Dorchester Minerals Announces Retirement of James E. Raley
2024-01-05 - Dorchester’s board designated Raley as manager emeritus in recognition of his service.
Ovintiv Names Sippy Chhina to Board of Directors
2024-01-12 - Chhina recently retired as a partner at services firm Deloitte Canada LLP.
TurningPoint Energy Names Naini as President
2024-01-09 - Salar Naini, who previously served as executive vice president of business development for TurningPoint, will lead the company’s daily business operations.
Vast Appoints Two Additional Directors to Board
2024-01-12 - Vast’s appointment of Peter Botten and Tom Quinn brings the board’s recently expanded size to seven members.