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US Admits Oil Prices May Go Up When Iran Sanctions Kick In

© REUTERS / Raheb Homavandi/File PhotoA gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Persian Gulf, Iran, July 25, 2005
A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Persian Gulf, Iran, July 25, 2005 - Sputnik International
Washington’s pressure on allies to end all imports of Iranian oil by November and its refusal to offer any waivers for that deadline have sent oil prices surging on expectations this could tighten global energy markets.

Even though oil prices are bound to jump after the US re-imposes sanctions on Iran, Washington won’t tap its own oil reserves as the country is confident that increased production from Saudi Arabia and Russia will meet the supply gap, Energy Secretary Rick Perry said.

"The Strategic Petroleum Reserve is in place for emergency natural disasters. So I would not recommend [tapping it], and I don't think the president would either," Perry was quoted by Platts energy news services as telling reporters at the World Gas Conference in Washington on Thursday.

"We look at this as an opportunity for OPEC members to fill this gap, if you will," he added.

S&P Global Platts Analytics expects a loss of more than one million barrels a day by November if the US manages to force buyers of Iranian crude to wind down their imports.

This file photo taken on March 12, 2017 shows an Panamanian tanker docking at the platform of the oil facility in the Khark Island, on the shore of the Gulf - Sputnik International
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Perry believes, however, that since Saudi Arabia will be able to produce 11 million barrels of oil a day and that Russia will increase output "the worldwide crude market does have some stability."

According to Bank of America Merrill Lynch experts, disruption to oil supplies from Iran as a result of US sanctions could see crude prices soar to around $90 a barrel.

Oil prices spiked this week after Washington said it would offer no extensions or waivers to Iran's oil buyers when sanctions return in November.

The re-imposition of sanctions on Iran, which US President Donald Trump threatened in May, includes a universal ban on Iran buying or acquiring US dollars as well as restrictions over purchases of crude oil from the country and investing in its oil projects.

Iran’s Oil Minister Bijan Namdar Zaganeh said on Friday that the US could not have imposed sanctions on the country’s oil sector if Iranian crude exports had reached 4 million barrels a day.

READ MORE: Iran to Retain Daily Oil Exports at 2Mln Barrels Despite US Sanctions — Official

He added that in this case “a disruption in Iranian oil supplies would be too painful for the Americans."

According to the Iranian Oil Ministry, the country is currently exporting 2.5 million barrels of oil a day.

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