First to lose

26 January 2012 By Una Galani Follow @ugalani

Oil prices may shoot up if Tehran abruptly cuts off the EU ahead of a full embargo. This would likely trigger a release of emergency stocks, and increased production from Saudi Arabia. But Iran won’t win much from higher prices, and would be the first to lose from a glut.

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Iran has threatened to pre-empt an EU embargo stopping purchases by its members of crude from the Islamic Republic.
Lawmakers in Tehran are finalising a draft bill to stop all oil trade with Europe, according to the Financial Times.
“If the plan is approved, the government will be obliged to stop its oil sales to Europe before the EU begins its oil embargo against Iran,” Mr Hosseini was quoted by the newspaper as saying.
The International Energy Agency said on Jan. 8 that it had “no specific contingency plans” in response to Western sanctions targeting Iran. The IEA has 1.6 billion barrels of stocks available for use in case of an emergency.
Saudi Arabia said on Jan. 16 that it could easily increase production by around 2 million barrels per day in a few days, up from current levels of around 10 million barrels per day.
The EU ban on Iranian oil is expected to take full effect by July 1. The strategy will be reviewed in May to see if it should proceed.

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