Today, on news that new sanctions had already driven Iranian exports down by 300,000 b/d, Brent futures pushed up to $127.03 from $123.78 before settling at $125.13. Brent is up $15 since the first of February, $19 since the beginning of the year, and $30 since October 2011. Yet, just three days ago, Saudi Arabia's oil minister Ali al-Naimi declared his country's willingness to raise production from 9.9 million barrels per day to 12.5 million barrels per day--an increase of 2.6 million barrels per day, well over the 2.1 million barrels that Iran produces daily. What's more, al-Naimi claims that Saudi Arabia's excess capacity could come online "immediately if needed." Thus, even if Iranian oil sanctions were implemented perfectly, with no cheating, and even if no other country was willing to tap excess capacity--neither of which are plausible--Saudi Arabia could more than make up for sanctioned Iranian oil.
Calm down, oil traders.
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