Gulf hydrocarbon producers are expected to boost their crude oil output by nearly 800,000 barrels per day in 2012 to offset an expected decline in Iran's oil exports because of the US led sanctions.
The study by the Washington based Institute for International Finance said that Saudi Arabia is expected to meet most of the Iranian oil loss given its massive spare capacity. The Gulf Kingdom has already boost supplies from an average 9.2 million barrels per day to just below 10 million barrels per day and its average output could be as high as 9.7 million barrels per day through 2012.
It noted that Saudi Arabia, the UAE and other Gulf Cooperation Council nations are the world's largest producer of crude oil accounting for about 20% of global supply and 40% of proven oil reserves. Spare production capacity in the region is now between 2.5 barrels per day 3.0 million barrels per day enabling the key countries, especially Saudi Arabia to meet any possible shortfall in oil exports from Iran stemming from the sanctions.
We expect the region's crude oil production to increase from an average of 16.5 million barrels per day in 2011 to 17.3 million barrels per day in 2012 to compensate for a likely reduction in supply from Iran as a result of the current sanctions.
The report showed that Saudi Arabia's production has remained close to 10 million barrels per day since September 2011 despite the recovery in Libyan supply and weaker global demand for oil. We expect aggregate crude oil production by the GCC to rise by around 800,000 barrels per day or an increase of 5% in 2012, if the reduction in Iran's oil exports is 800,000 barrels per day. It is likely that Saudi Arabia's oil production will increase further in the H2 of this year to accommodate additional cuts in Iran's oil production.
IIF said that the increase was also needed to meet a projected rise in demand for OPEC oil by around 350,000 barrels per day to nearly 30.3 million barrels per day in 2012. It expected Iran's average crude oil exports or production to be reduced by 800,000 barrels per day in 2012.
The report said that Saudi Arabia, the UAE and Kuwait could easily absorb such a loss by maintaining their current production through end-2012. This, combined with the recovery in Libyan oil output will enable OPEC to increase its total output by nearly 550,00 barrels per day in 2012.
It said that global oil demand is expected to increase by 900,000 barrels per day to 90.35 million barrels per day 2012 adding that OPEC's spare production capacity currently stands at around 3.2 million barrels per day of which Saudi Arabia makes up by far the largest share estimated at 2.5 million barrels per day.
Slightly more than one-third of the global increase is projected to be met by OPEC. Over the medium term, more than half of this increase in the global production of crude oil is expected to come from Saudi Arabia and Iraq.
Source: Emirates Business 24/7