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24 January 2012 | Angeline Albert
Purchasers of oil and related commodities will not suffer from the European Union’s (EU) decision to ban imports of Iranian oil, analysts have said.
EU members yesterday agreed to impose an oil embargo against Iran because of its nuclear programme. The ban means that, from this week, no new contracts to import Iran’s oil will be created by EU member states. Buyers in the region are to seek alternative sources of supply before the import ban on all Iranian oil comes into effect on 1 July. Currently, Iran supplies 1 per cent of the UK’s imports.
Simon Wardell, oil analyst at IHS CERA said: “Most people don’t think this will cause shortages or hurt buyers. Demand growth in 2012 is weaker than in 2011. China and India would need to follow the EU’s move and stop its Iranian imports for it to have a big impact on prices, but they are unlikely to do this.”
The oil price already went up earlier this month in anticipation of a ban by the EU. As a result of yesterday’s announcement, there was a slight increase in the price of Brent crude oil, which rose by $1 a barrel (64p) to $111 (£71) compared with the previous day.
John Kennedy, lead analyst at EnergyQuote JHA, said: “A lot can happen before now and 1 July when all imports from Iran will come to a stop. It’s likely Saudi Arabia will step up production to help fill the void, as it has significant levels of spare capacity.”
Iran has threatened to shut the Strait of Hormuz, situated on its coast, if the EU bans its oil. Some 19 per cent of the world’s supply (18 million barrels a day) are provided by Saudi Arabia, Kuwait, Iran, Iraq and the UAE via the Strait of Hormuz. Kennedy said that if Iran succeeded in blocking the strait, “much higher oil prices” would result.
Wardell argued that Iran could not carry out its threat because it would mean upsetting its customers India and China and stopping its neighbouring countries’ exports.