Lee said Iran was thought to be talking to Venezuelan leader Hugo Chavez about disguising Iran’s oil by mixing it with Venezuela’s. A veteran oil trader in London said Iran could also offer small discounts to tempt independent refiners into buying its crude. He added that Iran could also be looking, as it has in the past, for barter deals such as one in which Cuba might swap sugar for oil.
Iran’s greatest hope for rerouting its exports would be to sell more to its biggest customer, China, which imported about 550,000 barrels a day last year. But a contract dispute has led to a temporary decline in Iranian sales to China. And it isn’t clear how much China wants to rely on one source of oil or how much China can add to its strategic stockpiles.
Some companies will seek waivers to continue to do business with Iran; Japan said it would seek waivers to continue reduced purchases.
Some companies already have waivers. The Italian oil giant ENI has a waiver to continue to receive 10,000 barrels a day of Iranian crude oil as payment for work ENI did on two Iranian fields under old agreements, a company spokesman said. At the current rate, it would take until 2014 for ENI to be fully paid.
Although tensions over Iran may be adding as much as $5 a barrel to the price of oil, according to experts and traders, it is not the only geopolitical factor fueling high petroleum prices.
Nigeria, which produces about 2 million barrels a day, is facing Islamic violence in its north, nationwide protests over the end of fuel subsidies and strikes by major unions. Instability in Libya and Iraq threaten exports there as well.
Moreover, while Saudi Arabia, which produced 10 million barrels a day toward the end of last year, says it can boost output by another couple of million barrels a day to make up for other countries’ lost production, many oil experts fear that the kingdom would be physically unable to do that.
The world’s spare oil production — recently about 4 percent of daily production of 89 million barrels — is important in maintaining stable prices. If sanctions did block Iranian sales, part of that spare capacity would be used.
Deutsche Bank’s Sieminski says he has three “normal” or “standard” worries: “Can the Federal Reserve get the U.S. economy going? Can the Europeans solve their sovereign debt problem? And will China have a soft landing?” He said that, now, “on top of that we have geopolitical concerns mostly related to oil.”
The oil fears are at odds with the others. “With the macroeconomic issues, the worry is that we won’t get enough oil demand. With the geopolitical issues we worry that we won’t have enough oil supply,” he said. As a result, he predicted, “we had a lot of oil price volatility in 2011 and it doesn’t look like 2012 is going to improve much.”
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