OPEC has enough spare capacity to offset the disruption to Iranian oil production and exports to the world market if Israel affects production in the country. But if the conflict spreads to neighboring countries and their power, the situation will change dramatically, writes Reuters.
“OPEC has enough additional oil production capacity to offset Iran’s total loss of supply if Israel shuts down the country’s oil production.” – writes Reuters.
Iran launched a missile attack on Israel on Tuesday and the Prime Minister Benjamin Netanyahu threatened a crushing response.
Israel’s options for retaliation include attacks on Iranian oil production facilities, Axios reported, citing Israeli officials.
Iran produces 3.2 million barrels of oil per day and its share in world production is 3%. Exports have risen to 1.7 million barrels a day this year, despite US sanctions.
Israel could attack Iranian oil refineries and the Kharg Island oil port, through which about 90% of oil exports pass, the agency writes, citing analysts.
“Theoretically, if we lose all Iranian production, which is not our base case, OPEC+ will have enough spare capacity to offset the shock.” — the co-founder of Energy Aspects told Reuters Amrita Sen.
To maintain prices and market stability, OPEC+ reduced production by 5.8 million barrels per day. And, for example, Saudi Arabia is able to increase production by 3 million barrels per day, and the United Arab Emirates by 1.4 million.
Reuters notes that most of the excess capacity is located in the Persian Gulf and, in the event of an Israeli attack, Iranian allies could affect production in neighboring countries, including Saudi Arabia.
“In 2019, a drone attack by Iranian proxies on Saudi oil refineries briefly eliminated 50% of the kingdom’s oil production.” – noted in Reuters. Saudi Arabia and Iran have grown closer in recent years, but relations remain rocky.
The escalation of the conflict, in which oil production in Iran and neighboring countries will be attacked, will undoubtedly lead to an increase in prices. What will immediately hurt the vice president of the United States? Kamala Harris in the presidential race against donald trump.
“The United States is likely to try to pressure Israel toward a more modest response, wanting to avoid a significant escalation of tensions.” — he told Reuters Warren Patterson of the ING.
