EU plans for an oil embargo on Iranwill present supply difficulties for European refiners, the International Energy Agency warned in its latest oil market report on Wednesday.
The Paris-based IEA warned that the embargo EU foreign ministers are expected to announce on January 23 would force European refiners ‘into the difficult task of finding alternative comparable crudes, especially for Iran’s heavy crudes.’
The European Union imports about 600,000 barrels per day (bpd) of Iranian oil, the IEA estimated – about one-quarter of Iran’s exports of about 2.5 million bpd.
The EU countries principally affected by the planned ban, which might not be implemented on existing supply contracts for another six months, would be Italy, Spain and Greece, the IEA said.
Greece uses Iranian imports for around 30 per cent of its oil needs, the agency estimated.
Italy, Spain and Greece are likely to receive some form of exemption from the embargo while they search for alternative suppliers, the IEA said. Italy has already demanded that the embargo exclude supplies designed to repay a 1-billion-euro (1.28-billion-dollar) debt Iran has with Italian energy firm ENI.
Asian countries, such as Japan, China and South Korea, have also been scrambling to find alternative supplies to Iranian oil in recent weeks, according to the IEA, which reported a flurry of visits by Asian officials to other Middle Eastern producers.
Fears over oil supplies escalated afterIranupped its brinkmanship with the West in December by carrying out naval exercises in theStrait of Hormuz- the key route for Gulf oil supplies to the West.
Iranhas threatened to close the strait in the event of an oil embargo. The IEA quoted military analysts as saying any closure was likely to be short-lived, given warnings by theUnited StatesandBritainof naval action if needed to keep it open.
In the event of a closure,Saudi Arabiahad the capacity to ship 2.5 million bpd via the East-West pipeline to theRed Sea, the IEA said. TheAbu Dhabipipeline, which has a capacity of 1.5-million bpd and which will bypass theStrait of Hormuz, would also be operational by June.
Meanwhile, the IEA revised its outlook for global oil demand for 2012 down to 90 million barrels per day, a 1.1 million bpd increase on 2011 but less than the 1.3 million bpd increase the agency previously forecast.
In the early part of 2012 demand, demand would continue to affected by a ‘growth-impeding combination of a weakening economy and high crude prices,’ the IEA said.
