No risk to oil supply: Mazrouei
Oil prices shed gains as alarm over Iran rocket strike fades; Iraqi oil facilities secure
Opec is ready to respond, but sees no immediate shortages in oil supplies, the UAE Energy Minister said on Wednesday, as tensions escalated in the aftermath of Iran missile strike at military bases in Iraq used by US forces.
"It is not currently a war situation," Suhail Mohamed Faraj Al Mazrouei told reporters on the sidelines of a conference in Abu Dhabi. "We are all hoping for a de-escalation. I think wisdom will prevail despite the tension."
Al Mazrouei said no country could afford a return to a situation where crude oil costs $100 per barrel, adding that Opec would seek to ensure that ample energy supplies are available.
"We will always make sure that we supply the world with whatever it requires," the minister said, adding that the UAE was building spare capacity in order to avoid shortages.
The minister cautioned that even Opec and its allies don't have unlimited resources. "We have limitations as well and cannot just replace any quantity of supply" that is taken offline, he was quoted as saying.
Speaking to reporters at the Gulf Intelligence's UAE Energy Forum, Al Mazrouei said even in the past during times of war, the flow of oil has been maintained.
"So let's not exaggerate what's happening. There is no risk that we have seen to the Strait of Hormuz or the movement of oil yet," the minister said. The strategic narrow waterway between the Arabian Peninsula and Iran accounts for 20 per cent of the world's oil shipments. In 2018, 21 million barrels of crude per day passed through it.
Iraqi oil facilities are secured and the country's production is continuing, Opec's secretary-general Mohammed Barkindo said.
"It's a big relief that the facilities continue to be secured in Iraq, the production is continuing and effective," Barkindo said on the sidelines of a conference in Abu Dhabi.
He said he was optimistic Iraq would reach 100 per cent compliance with Opec cuts in time, despite current tensions. Iraq is currently the second biggest player in Opec after Saudi Arabia.
In a message to US President Donald Trump, Barkindo said the Organisation of the Petroleum Exporting Countries (Opec) alone could not shoulder the responsibility of maintaining a stable oil market.
Oil sheds gains
Brent crude oil surged to $71.75 a barrel on Wednesday in reaction to Iran's retaliatory missile strike at Iraq military bases. It dropped 60 cents, or 0.88 per cent, at $67.67 by 1334GMT, after falling by over $1. In early trade, the contract hit its highest since mid-September at $71.75. West Texas Intermediate crude futures were down 92 cents, or 1.47 per cent, at $61.78 a barrel, after also falling over $1. The futures earlier hit $65.85, the highest since late April.
Analysts said a drastic spike in oil prices could deal a blow to the world economy, which is already struggling from weak manufacturing activity. Dow (INDU) futures briefly tumbled more than 400 points during Asian trading hours on Wednesday. Dow futures were last down about 50 points.
"Supply disruptions were put at the forefront of the agenda for investors," said Mihir Kapadia, CEO of Sun Global Investments.
He said it is likely that Iran would try and disrupt oil exports that travel through the Straits of Hormuz.
British Foreign Secretary Dominic Raab voiced concern over "reports of casualties". But Iranian Foreign Minister Mohammad Javad Zarif insisted that the country does "not seek escalation or war."
Traders remain less fearful over the loss of Iranian oil because the Islamic republic remains under punishing US sanctions that were re-imposed by Trump in 2018.
Energy Aspects analyst Christopher Haines noted traders were instead worried about oil output from Iraq - particularly if US troops are pulled out.
"There is a potential risk of disruption on Iraq, whose crude exports represent (about) 3.5 million barrels per day," Haines said. "If US troops leave, it will leave the area less secure."
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