Isolating Iran from the oil market should have minimum market disruptions because of close cooperation with Saudi Arabia, a U.S. official said.
U.S. President Donald Trump’s decision to walk out of the Joint Comprehensive Plan of Action in May means some unilateral sanctions on Iran will be reinstated by August. Sanctions extending to the oil sector snap back on Nov. 4 and the U.S. government has said it wants to zero out Iranian oil exports by then.
Isolating Iran could sideline millions of barrels of oil per day from a market with little spare capacity left. A report last week from Swiss investment bank UBS found spare capacity, the amount of oil a producer can add to the market in short order, could fall to a 10-year low within the next year.
Speaking to reporters on background, a senior U.S. State Department official said the Trump administration was “very serious” about imposing sanctions on Iran’s oil, from which Washington suspects Iran derives revenue to fund malign behavior in the Middle East.
“We are working very closely with nations to provide alternatives to the Iranian supply of oil,” the official said. “We’re very confident that we’ll be able to do that without market disruptions and working closely with the Saudis and other oil producing nations to make sure that we have a well-supplied oil market.”