Singapore — The oil market is currently in balance but might face challenges towards the end of the year as US sanctions on Iran could take a toll on supplies, Keisuke Sadamori, International Energy Agency director for energy markets and security said Tuesday.
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"Now, the market is in balance," Sadamori said in an interview with S&P Global Platts Tuesday on the sidelines of the Asia Pacific Petroleum Conference in Singapore.
"Going forward, we [will] have impact from sanctions against Iranian exports, continuing decline in Venezuelan production and possible disruptions [in supplies] from countries like Libya. The market balance towards the end of this year may become challenging," Sadamori said. "If that happens, it will require other producers to increase production."
Asked about IEA's latest view on the potential implication on the market when Iranian sanctions snap back on November 5, Sadamori said: "All we can say at this moment is that the impact will be larger than the last one, which reduced 1.2 million b/d. The impact on the market will be really substantial on the supply side."
Sadamori said that Saudi Arabia, the UAE, Kuwait and Iraq had spare capacity, but added: "We cannot be sure how quickly and to what extent those numbers in spare capacity will actually be deployed, corresponding to the market requirement."
Sadamori added that the IEA had estimated spare supply capacity of Saudi Arabia at 1.6 million b/d, the UAE at 0.2 million b/d, Kuwait at 0.1 million b/d and Iraq at 0.15 million b/d.
"We observe the market when there is a serious supply disruption or supply shortage, which the oil market itself cannot cope with. Then our member countries would discuss whether to use [releasing petroleum reserves] mechanism," Sadamori said.
He said that oil producers who are part of the OPEC/non-OPEC production cut agreement should respond in the face of a supply shortage.
"Those producers would have to respond to the market demand and increase the production first. So of course our belief is that market forces based on price signals should work first," Sadamori said.
US President Donald Trump said on May 8 that the US would withdraw from the Iran nuclear deal and re-impose sanctions that have been frozen since January 2016 as part of the Joint Comprehensive Plan of Action.
-- Takeo Kumagai, firstname.lastname@example.org
-- Edited by Geetha Narayanasamy, email@example.com