Kuwait City, 14 March (Argus) — Oil producing countries need to supply the market with crude, because current prices are threatening the future of the global economic recovery, a senior US energy official said today.
“We think the markets are tight. That's what our Energy Information Administration (EIA) shows us and, therefore, we think there is need for more production,” Daniel Poneman, US deputy energy secretary, told reporters on the sidelines of the International Oil Forum (IEF). “We are saying at the current moment the prices are too high to be consistent with global recovery and we are concerned.”
Global spare production capacity is around 1mn b/d lower than its 2008-11 average of 3.5mn b/d and should be increased to absorb future increases in demand or mitigate changes in supply, according to Poneman.
The US is concerned that sustained high oil prices could hinder economic recovery not just in the US, but elsewhere around the globe.
“We witnessed how damaging that could be to the global economy in 2008. Nobody wants to see a repeat of what happened in 2008, where you had a very high spike, leading to demand destruction and global recession,” Poneman said.
He also stressed that tapping the Strategic Petroleum Reserve (SPR) as the Obama Administration chose to do last summer was a possibility.
“The president has been clear. We have every tool available at our disposal, and we are going to keep consulting with our partners globally and at the IEA (about) what tools we need to be using,” Poneman said.
He also stressed that political tensions in the Middle East are caused by what he deemed Iran's non-compliance with international nuclear non-proliferation norms. The US is “hoping” for a diplomatic resolution to the issue which would restore calm to the global oil markets, Poneman said.
The US is trying to disrupt Iran's ability to find buyers for its oil exports by targeting banks that do business with Tehran's central bank. Washington will begin imposing sanctions on foreign banks, including government-owned financial institutions, involved in oil or petroleum product deals beginning on 28 June, if by that time President Barack Obama has determined that supplies are sufficient to accommodate the loss of Iranian exports.
Poneman said countries that buy Iranian crude are expected to make “significant reductions” in their imports or their financial institutions could be subject to US sanctions under a defense authorization measure Obama signed at the end of last year. “The statute is calling for significant reductions and we are encouraging all countries to take a careful read of the statute and reduce their consumption accordingly so we don't have to face those kinds of issues,” he said.
Iran's oil minister Rostam Qasemi today implicitly accused US of using oil as a political tool and warned that sanctions against Iran's oil sector and oil sales would harm global markets.
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