IEA warns against increased sanctions on Iran

The International Energy Agency warned the US-led West against any more sanctions on Iran, cautioning that tougher embargos on OPEC's second-largest producer would lead to higher global crude prices. A US and UK proposed European Union ban on purchases of almost 600,000 barrels a day of Iranian crude would "likely" force refiners in the Mediterranean region to pay more for oil from other suppliers, the agency said in a report released today, Bloomberg reported. The EU is still discussing a possible halt to purchases of crude from Iran, the world's third-largest oil exporter. "Given already very low European crude inventories, a spate of precautionary buying and escalating tensions surrounding the Iranian issue could sustain prompt prices at levels higher than otherwise, amid the growing concerns about the euro zone and weaker global economic activity for 2012," the IEA said. Additional sanctions on Iran would probably result in higher prices for buyers in the Mediterranean region, as they seek replacement crude from other producers such as Saudi Arabia, Iraq, Russia, the Paris-based agency said. "Saudi spare capacity may not be a precise match for the significant volumes of Iranian Heavy crude involved," it said of the oil grade. Mediterranean refiners have started "to enquire about extra cargoes of Arab Light, the closest quality match for Iranian Heavy, although much of current Saudi spare capacity may instead be held in the form of less suitable Arab Medium or Arab Heavy," it said. Meantime, Iran's Oil Minister Rostam Qassemi said last week that his Saudi counterpart has vowed that if the western, specially the European, states ban Iranian oil imports, Riyadh would not replace Tehran as their source of crude supplies. Qassemi made the remarks on the sidelines of the 160th ministerial meeting of the Organization of Petroleum Exporting Countries (OPEC) in Vienna. Going into a closed-door talks of the OPEC member states, Qassemi said he had met with Saudi counterpart Ali Naimi and gained a pledge that the Saudis would refrain from flooding the market with extra oil in case an international embargo on Iranian crude hurt Tehran's ability to sell its petroleum. The US is reportedly seeking Saudi assurances that they are ready to make up for Iranian crude lost from the market should increased international sanctions be imposed on Tehran's crude. Qassemi said he spoke to Naimi and Naimi "rejects" the notion "that he wants to replace Iranian crude if Iran faces (such) sanctions."