International Monetary Fund (IMF) estimates that crude oil prices could go up by as much as 30% in 2012 on the fears of supply disruption fromIran. “A halt of Iran’s exports to Organization for Economic Cooperation and Development (OECD) economies, if not offset, would likely trigger an initial oil price increase of about 20 to 30%, with other producers or emergency stock releases likely providing some offset over time––a part of this is likely priced in already”, the recent report by the IMF states
“As a result of the recent EU oil import embargo, other countries’ tighter sanctions, andIran’s partial oil export embargo, the potential Iranian oil supply shock is morphing into an actual shock because lower Iranian oil production and exports seem inevitable during 2012 and beyond”. IMF argues that given the low responsiveness of global oil demand to price changes in the short term, such an oil supply disruption would require a very large price response to maintain global supply-demand balance.
Iran has threatened havoc in energy markets unless the EU shows some leeway to Iran’s needs.
This comes ahead of the second round of nuclear talks due on May 23, 2012. Currently Iran has stopped exporting Britain and France but it sells to other countries around the world, Iranian Oil minister Rostam Ghasemi said while adding that “If Europeans don’t cancel the oil sanctions, it will, for sure, have grave impacts on the energy market especially on the energy security”.
Ghasemi also stated that if the EU does not lift its sanction by the nuclear talks in May,Iranwill surely cut oil exports toEurope.Iranis the second biggest oil producer among the OPEC nations. The country has been facing increasing sanctions from both U.S. & EU, who have been trying to pressurize theMiddle Eastcountry to give up on its nuclear programme. The EU ban on oil imports fromIrancomes into effect on July 01, 2012.
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