Stocks could cover Iran oil supply loss for year: IEA

REUTERS | FEBRUARY 2010 | SOURCE: The Calgary Herald

The world's oil stocks can absorb the loss of supply from Iran for a year and this should have a calming effect on markets, an official from the International Energy Agency (EIA) said on Friday.

Stocks could cover Iran oil supply loss for year: IEA

Iran is OPEC's second-largest producer and concerns that the row with the United States and its allies over Tehran's nuclear programme may lead to a disruption in its crude supplies, have moved oil markets.

"Iran produces 3.5 million-4.0 million barrels per day (bpd) of oil," David Fyfe, head of the oil industry and markets division at the IEA, told an oil forum in Tokyo. "Stocks could absorb a 3 million to 4 million-bpd supply gap for more than a year. There are mechanisms there for supply disruption, this could be a calming factor for markets."

Paris-based EIA is adviser to 28 industrialised economies. Oil inventories have swollen since the beginning of the economic downturn as demand fell below supply. OPEC cuts have also given the world a bigger spare capacity cushion than it has had for years to deal with any surprise outages in global supply.

With such large spare capacity, oil prices moved little last year, as political turmoil engulfed Iran after a disputed presidential election. Prices have been in tight range between $68 and $84 a barrel CLc1 since last October, after wild swings in 2008 that saw oil prices jump to a record above $147 a barrel before diving to around $32 in just five months.

But there was always the danger that politics in Iran would impact supply, said Leo Drollas, chief economist at the London-based Centre for Global Energy Studies. "The country is in turmoil," Drollas told the same oil forum. "There will be a big change there eventually, we don't know when. But the oil market will be affected."

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