EU intends to embargo Iranian oil in July

On the 18th, several European Union diplomats were quoted as saying that the EU unanimously agreed to launch an oil embargo on Iran on July 1. According to another report, the EU may also freeze some of the assets of the Iranian Central Bank and prohibit conducting part of the deal with it.

Analysts believe that if the EU plans to impose an embargo on Iranian crude oil, and Saudi Arabia will use the key idle capacity to increase output in order to replace Iranian supply, global oil market supply will reach tighter levels in July 2008, reaching US$147 per barrel. Recorded level.

Crude oil prices have been relatively stable since the spring of 2011 and remain within the range of $100 to $120 per barrel. However, at the beginning of 2012, as the EU was preparing to impose a ban on oil in Iran, the Iranian side shut down the Strait of Hormuz, the main channel for oil exports, and oil prices rose by an average of 4 to 5 US dollars per barrel.

The current oil market is delicate, and high oil prices correspond to increasingly weak market demand. The International Energy Agency (IEA) released its latest monthly report on the 18th, saying that since the global financial crisis of 2008-2009, oil demand has dropped for the first time, due to the economic downturn, the warm winter in the northern hemisphere, and high crude oil prices.

The agency said that in the fourth quarter of 2011, the daily demand for oil decreased by 300,000 barrels year-on-year. Although IE A still expects an increase in overall demand in 2012, it has lowered its forecast for daily demand growth this year from 1.3 million barrels to 1.1 million barrels, and indicated that it may continue to reduce. In 2011, the total global oil demand was 89.5 million barrels.

David Fife, head of the oil industry and marketing department at IE A, said that the decline in oil demand at the end of last year was related to the warm winter, which is in stark contrast to the cold winter of 2010 and 2011. This decline is surprising. He said that the absolute contraction in demand is "very rare." "We are reminding the parties that there is indeed a downside risk to the global economy and oil demand."

Feifu said that if the global gross domestic product (GDP) growth is expected to further reduce, then this year's global oil demand may show zero growth.

Although the demand is cold, the oil market is also facing an unprecedented tight supply situation, which plays a supporting role in the trend of oil prices.

Saudi Oil Minister Naimi told CNN on the 16th that Saudi Arabia can almost immediately increase daily production by about 2 million barrels on current basis to 11.4 million to 11.8 million barrels; if it is to further increase daily production by 700,000 tons. In the case of barrels, Saudi Arabia may well need about 90 days.

When estimating idle capacity, IEA only considers production capacity that can be put into production within 30 days as effective idle capacity. This indicates that the agency’s original estimate of idle capacity in Saudi Arabia may be too high. The idle capacity of Saudi’s 12 million barrels of daily capacity may be overestimated by 200,000 to 600,000 barrels.

Feif, head of the IE A oil market department, said that IE A will reassess the estimated value of Saudi idle capacity according to Naimi's remarks. IE A said that due to Saudi Arabia’s production increase to more than 10 million barrels a day and shipped to Europe this month, from the latest tanker shipment data, the country’s idle capacity is under greater pressure.

If all the 600,000 barrels of oil that Iran ships to Europe every day are replaced by Saudi Arabia, then the operating rate of the global oil industry will reach about 98%, reaching the highest level since the summer of 2008.

Jacob, managing director of consulting firm Petrom atrix, said that if the operating rate reaches this level, there will be basically no idle capacity to cope with the decline in production caused by hurricanes, rebel groups bombing oil pipelines and other issues.

Saudi Arabia’s recent position has led the International Energy Agency (IEA) to consider whether its estimate of Saudi Arabia’s effective production capacity is too high. Analysts warn that over-reliance on Saudi Arabia may cause the oil market to be extremely vulnerable to the problems of ordinary supply disruptions. A key factor in the soaring oil price in 2008 was the low idle capacity at that time.

Citi analysts pointed out in the research report that due to too many risk factors in the supply of the oil market, relying on Saudi Arabia to fill the vacancies of Iranian oil will lead to too little room for idle capacity.

There is a close relationship between oil prices and the leeway for idle oil production. According to IEA data, in 2008, the operating rate of the oil industry reached 98%, and the oil price also hit a record high in that year. When the world economy fell into a deep recession in early 2009 and oil demand fell, the operating rate of the oil industry fell to only 94%, while oil prices also fell below 40 US dollars per barrel. At present, the operating rate of the oil industry has reached about 97%, but Saudi Arabia's remarks show that the supply of crude oil may be more intense.