US sanctions on Iran are unlikely to impact the oil market due to a glut in supplies globally, but Iran’s production capacity could be hit due to a possible squeeze in investments, the head of research at Abu Dhabi Investment Authority (ADIA) said.
Big producers such as Saudi Arabia, Russia, the United States and others have enough capacity to ensure global supply, analysts at ADIA and Citigroup said.
“You can’t exclude spikes but basically there’s too much oil in the world and that will prevail in the long-term,” Christof Ruhl, head of global research at ADIA said on the sidelines of a financial conference in Abu Dhabi.
“The system has already shown that there’s ample surplus capacity in the world to more than meet the amount of oil taken out of Iran for the time being,” said Ed Morse, managing director & global head of commodities research at Citi.
There is significant production coming out of the United States, Canada, Brazil and Middle Eastern countries, he said.
When production declines, it damages fields and capacity and that is more important in the medium to long term, said Ruhl.
“It is not going to help the sector, it means pulling out investments, it means financial isolation, declining exports and revenues and potentially declining production,” he said, adding that it depends on how stringently the sanctions are executed.
Iran’s ability to store crude oil is crucial to keep production up rather than its ability to sell in the short term, said Ruhl.
