The Iranian oil embargo could cut 1.5 million barrels a day from global supplies and push prices up by $20 to $30 a barrel, the International Monetary Fund said today.
The IMF said closure of the Strait of Hormuz, a key shipping channel for roughly a fifth of the world’s crude supplies, “could trigger a much larger price spike, including by limiting offsetting supplies from other producers in the region.”
While it noted markets are assigning a low probability to a closure of the channel, “A blockade of the Strait of Hormuz would constitute, and be perceived by markets to presage, sharply heightened global geopolitical tension involving a much larger and unprecedented disruption.”
“A supply disruption would likely have a large effect on prices, not only reflecting relatively insensitive supply and demand in the short run but also the current state of oil market buffers,” the IMF said in a report to the Group of 20 largest industrialized and developing nations.
The fund said crude stocks in advanced economies are below average. ExcludingIran, spare capacity in the Organization of Petroleum Exporting Countries is around 3.8 million barrels a day, or roughly 5.2% of global crude oil production.
“A halt of Iran’s exports to OECD economies without offset from other sources would likely trigger an initial oil price increase of around 20%-30% (about $20-30 a barrel currently), with other producers or emergency stock releases likely providing some offset over time,” the fund said.
Saudi Arabia and some other major oil exporters have said they are willing to increase output to help meet demand from countries such as Japan,Turkey and South Korea that import Iranian oil.
