UAE, Saudi oil to make up for shortfall

Iran's oil industry was under renewed pressure last night as both the UAE and Saudi Arabia signalled that they planned to increase supply to Tehran's key buyers of crude. Reuters quoted sources who claimed Abu Dhabi National Oil Company (Adnoc) will supply full contractual crude volumes to Asia in March for the first time in almost a year, to help the region's top buyers cut their dependence on Iranian oil. Meanwhile, President Lee Myung-bak of South Korea, the fifth largest buyer of Iranian crude, held talks with Saudi Arabia about increasing supplies from the Gulf. Riyadh has repeatedly said it is ready to make up any shortfall. Commenting on the latest news, Said Hirsh, an analyst at Capital Economics, told Gulf News the move would apply further pressure on Iran, as well as increase revenue in the Gulf. "The UAE on its own of course cannot make up the shortfall, so Saudi will be the key here, but Libyan oil is also coming back to previous levels quicker than early estimates," Hirsh said. Samuel Ciszuk, a consultant at KBC Energy Economics, played down the impact of the UAE move. "[This] would not make that much difference. The key here is that Saudi promises to consider providing extra volumes to South Korea if it struggles with sourcing enough crude on its own," he said. Hirsh said the real test of the situation regarding the Gulf oil exporters and Iran is still to come. "The breaking point will only come if there is a major oil embargo, taking away most of Iran's revenues," he said. "I think this is when we may see some aggression from Iran as it can cause internal troubles and disruption in the Gulf through its wide network. In this case, I don't think we will be worrying about making up a production shortfall." Ciszuk added that although Saudi Arabia is making tentative efforts to attract Asian buyers, it will only go so far. "Curtailing and politicising the global oil markets with an embargo is nothing the Saudis want to subsidise, so to speak," he said. Meanwhile, Dow Jones reported on Tuesday night that, in a rare bit of good news for Tehran, India has boosted its imports of Iranian oil, becoming the country's largest customer last month and largely offsetting a cut in Chinese purchases of Iranian crude, people within the oil industry told the newswire. "India scooped much of the crude the Chinese didn't want," one person said, noting that Iranian crude exports to India rose to 550,000 barrels a day in January, up 37.5 per cent from December. That partly offset a 50 per cent cut in crude exports to China, now at about 250,000 barrels a day amid a pricing dispute.