A potential loss of Iran output, declining Venezuelan output, along with also also the “double supply shortfall” the idea presents could prompt various other producers to step in to fill the gap — although This particular comes at a time of production restraint among major oil producers in an attempt to boost prices.
Twenty-four OPEC along with also also non-OPEC producers, most notably Russia, are required to continue a deal (called the ‘Vienna Agreement’) to cut production by 1.2 mb/d until at least the end of 2018 along with also also the strategy has been working with benchmark Brent crude currently trading around $78 a barrel along with also also WTI almost touching $71.
Markets are treading carefully around uncertainty over Iran’s supply, however, along with also also signs of ample supply kept a lid on cost rises Wednesday.
Examining whether various other producers “could step in to ensure an orderly flow of oil to the market along with also also offset a disruption to Iranian exports,” the IEA said of which neither Venezuela nor Mexico can raise output inside short term, “yet some of the 1.5 mb/d of which have been cut by various other producers under the Vienna Agreement might be available to keep markets well supplied.”
For one, OPEC’s largest oil producer Saudi Arabia has signaled of which the idea could step into the breach, although the idea along with also also various other Gulf producers have yet to ramp up output to compensate for Venezuela’s losses. The next OPEC meeting on June 22 could prove decisive, however, with producers potentially removing cuts.
“Should a decision be taken to remove the cuts, only Saudi Arabia, the United Arab Emirates, Kuwait along with also also Russia are likely to be capable of a quick ramp up of substantial volumes. The four producers pumped at record rates ahead of the supply cuts along with also also could, in theory, increase output by a combined 1.3 mb/d in short order,” the IEA said.
Saudi Arabia made up the lion’s share of spare production capacity, the IEA said.
“As of April, OPEC’s spare production capacity was 3.47 mb/d — defined as the level of which can be reached within 0 days along with also also sustained for an extended period — with Saudi Arabia accounting for roughly 60 percent of the total.”