U.S. waiting to see who else steps up on Iran oil embargo

Analysts say the embargo will trigger a surge in global crude oil prices, which were trading Thursday at about $112 per barrel.

According to Mr. Wittner, most market operators believe Saudi Arabia, holder of the world’s largest oil reserves, will fill any gaps in oil flow created by the boycott. The catch is that increased Saudi output will have an impact on the Saudi Arabia’s overall spare capacity.

“That’s what’s bullish for the oil markets because oil markets look very much at spare capacities,” Mr. Wittner said. “As we see Saudi exports go up and their spare capacity go down, I think there’s a good chance that we’ll see oil go a $125 type of range.”

With the EU’s embargo slated to go into effect in June, the ripple from such a price increase could cause a jump in U.S. gasoline prices this summer. That likelihood is creating something of a paradox for U.S. officials now traveling to globe in to persuade others to join the embargo.

“The more successful you are in shutting in Iran’s oil, the more pressure you might put on prices,” said Mr. Bahree. “People say we could get the oil from somewhere else, yes, but to the extent we do, the spare capacities that help in stabilizing the market may be impacted, and this could have an adverse effect on prices.”

© Copyright 2013 The Washington Times, LLC. Click here for reprint permission.