By Mahmoud Habboush, Anthony DiPaola and Verity Ratcliffe
Global crude markets are well supplied, and the Organization of Petroleum Exporting Countries and allied producers will respond if necessary to spiking tensions in the region, U.A.E. Energy Minister Suhail Al Mazrouei told reporters in Abu Dhabi. The escalating conflict between the U.S. and Iran doesn’t pose a risk to the Strait of Hormuz, a bottleneck for oil shipments from the Persian Gulf, he said.
“We are not forecasting a shortage of supply unless we have a catastrophic escalation, which we don’t see,” Al Mazrouei said in the United Arab Emirates’ capital.
OPEC Secretary-General Mohammad Barkindo reinforced the message. “We remain confident that our leaders are doing everything possible to restore normalcy to arrest the situation before it spirals out of control,” Barkindo said in Abu Dhabi.
Oil prices jumped after Iran attacked two U.S.-Iraqi bases in its first response to the killing of one of its top generals on Jan. 3, sparking fears the deepening conflict will disrupt global crude supplies. Futures in London briefly surged more than 5% to almost $72 a barrel as the Islamic Revolutionary Guard Corps claimed responsibility for the missile strikes, which the Pentagon said were launched from Iran.
Oil facilities in Iraq, OPEC’s second-largest producer, are secure, and disruptions in supply from the country are unlikely, Barkindo told reporters. The so-called OPEC+ coalition of 24 nations serves as insurance against any major halts in world supply, he said.
While oil flows from the Middle East continue unimpeded for now, the risk of disruption is spooking crude markets. Most exports from the Gulf, including shipments from Saudi Arabia, Iran and Iraq, pass through the Strait of Hormuz, a narrow waterway that Iran has repeatedly threatened to block in the event of a war.
“Geopolitics is back” as a factor in oil prices, after playing a lesser role for the past two or three years, Al Mazrouei said. However, the U.A.E. isn’t concerned about the supply or demand for crude, and a war in the Gulf is “the last thing we want,” he said.
During the Iran-Iraq conflict of the 1980s, oil supply from the the Gulf continued, according to the minister. Iran understands that the Strait of Hormuz is important for the global economy, and a cut in supply would affect everyone, he said, adding: “The world economy cannot withstand $100 oil.”
Demand for oil is healthy, and growth in U.S. shale supply is softening, he said. OPEC+ agreed last month to deepen cuts in output through March in a bid to drain excess inventories and prop up crude.
The U.A.E. is OPEC’s third-largest producer, after Saudi Arabia and Iraq. Iran’s output and exports have plummeted in the face of U.S. sanctions.