Iran’s Oil Minister Bijan Zanganeh said on Sunday that US sanctions on Iran and Venezuela and tensions in Libya have made the supply-demand balance in the global oil market fragile, warning of the consequences of increase pressure on Tehran.
Oil prices have risen more than 30 percent this year on the back of supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC), US sanctions on oil exporters Iran and Venezuela and the escalating conflict in OPEC member, Libya.
“Oil prices are increasing every day. That shows the market is worried,” Zanganeh was quoted as saying by the Tasnim news agency. “Venezuela is in trouble. Russia is also under sanctions. Libya is in turmoil. Part of US oil production has stopped. These show the supply-demand balance is very fragile,” he added.
“If they (the Americans) decide to increase pressures on Iran, the fragility will increase in an unpredictable way,” he continued.
The US reimposed sanctions on Iran in November after pulling out of a 2015 nuclear accord between it and six world powers. The sanctions have already halved Iranian oil exports.
US President Donald Trump eventually aims to halt Iranian oil exports, choking off Tehran’s main source of revenue. Washington is pressuring Iran to curtail its nuclear program and stop backing militant proxies across the Middle East.
OPEC and its allies will meet in June to decide whether to continue withholding supply. OPEC’s greatest producer, Saudi Arabia, is believed to be keen on maintaining this policy, but sources within the group said it could raise output from July if disruptions continue elsewhere.
The producer group’s supply cuts have been aimed largely at offsetting record crude production in the United States.
Sources familiar with the matter told Reuters that OPEC could raise oil output from July if Venezuelan and Iranian supply drops further and prices keep rallying because extending production cuts with Russia and other allies could over-tighten the market.
Venezuelan crude production has dropped below 1 million barrels per day (bpd) due to US sanctions. Iranian supply could fall further after May if, as many expect, Washington tightens its sanctions against Tehran.
The combined supply cuts have helped drive more than 30 percent rally in crude prices this year to nearly USD72 a barrel, prompting pressure from Trump for OPEC to ease its market-supporting efforts. OPEC has been saying the curbs must remain, but that stance is now softening.
“If there was a big drop in supply and oil went up to USD85, that’s something we don’t want to see so we may have to increase output,” one OPEC source said.
