Tightening the Screws (February 3, 2012)

While the European Union’s (EU) announced phased embargo on imports of Iranian oil may be stale news to some, views on the eventual ramifications of this move continue to swirl in the oil market. The EU’s timetable to wean its members off Iranian oil extends to the beginning of July. Over this span, the hope is that trade patterns will adjust to find sufficient replacement barrels so as to mitigate any oil supply or price shock. An estimated 20 percent of Iran’s roughly 3.2 million barrels/day crude oil and condensate exports is taken by EU. Replacement of this flow amounts to less than half Libya’s outage that 2011 market’s successfully endured. How oil price will likely adapt to this dislocation of Iranian oil, especially if protracted, is still under debate.

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