The latest IMF report on the Middle East and North Africa region had a short section on the impact of sanctions.
“The recovery of oil production in Libya is likely to more than offset the decline in production and exports in Iran due to sanctions, while capacity expansion continues in Iraq,” it said.
The IMF, however, failed to give any numbers or explain what scale of loss of Iranian exports it was anticipating. Iran last year exported an average of 2.5 million barrels a day while Libya, before production was halted by the revolution, exported about 1.6 million barrels a day. Thus, the recovery of Libyan production cannot make up for all Iranian exports, though it could cover about two-thirds.
It appeared the IMF was assuming sanctions would cut no more than two-thirds of Iran’s exports, though the report failed to state that.
However, the IMF also factored in Saudi Arabia and its unused production capacity. It said, “Saudi Arabia’s role as swing producer is expected to require a smaller oil production increase than was required in 2011” when Libyan output was stopped. In other words, with Libya back on the market, the Saudis won’t have to pump as much this year to cover losses of Iranian crude as they needed to pump last year to make up losses of Libyan crude.
The report indicated it was not considering a closure of the Strait of Hormuz in its calculations.
It cautioned, “Oil supplies from Iraq, Libya and Yemen remain uncertain, and non-OPEC production projections may not be met. While global oil demand and supply remain finely balanced, Saudi Arabia remains well-positioned to respond to most disruptions in global energy markets.”
Saudi Arabia’s unused capacity stands at about 2.5 million barrels a day now or about the same as Iran’s exports last year.