Riyadh can handle crude oil disruptions

March 14, 2012 at 7:51 AM
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WASHINGTON, March 14 (UPI) -- There is a "basic assumption" that Saudi Arabia will make up the difference for the effects sanctions on Iran are having on oil markets, an analyst said.

Washington is said to have the confidence that major oil producers like Saudi Arabia have the production capacity to offset any market disruptions.

"The basic assumption in the market is that Saudi Arabia will pick up the difference so the assurance won't have much of an impact on prices," James Williams, an economist at energy research company WTRG Economics, told Bloomberg News.

"The Saudis are behaving more or less as they have for the last almost 40 years. They don't want to see prices so high that there is permanent demand destruction."

Delegates gathered in Kuwait for an international energy forum said crude oil prices so far in 2012 are too high. Oil prices spiked in part because of sanctions on Iran and Tehran's threats to close key shipping lanes in the Strait of Hormuz.

Though Washington hasn't made a formal request to Riyadh, U.S. Energy Secretary Steven Chu confirmed that "we do have discussions with various countries on things like that."

A person said to be familiar with Saudi Arabia's oil policy told Bloomberg there were no requests for action beyond July when international sanctions on Tehran go into force officially.

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