Enough oil supply to cover Iran sanctions: Saudi

Saudi Oil Minister Ali al-Naimi backed US sanctions on arch rival Iran on Wednesday, claiming that its effect on the global economy would be minimal.

Naimi said oil markets would remain well supplied after Western sanctions against Tehran are fully enforced, as global crude oversupply is already as much as 1.5 million barrels per day (bpd).

US and European sanctions on Iran's oil exports enter full swing in June and July, and are aimed at stemming the flow of petrodollars to Tehran to force it to halt the country's nuclear program and cripple its economy.

Iran exports about 2.2 million bpd, mostly to Asia, in a global market of around 89 million bpd.

Major Asian economies such as China and India have been hesitant to back the US sanctions, and have said they will investigate paying in a currency other than dollars to avoid them.

When asked if he saw oil supplies tightening in coming months as global sanctions against Iran come into effect, Naimi said: "Absolutely not."

"There is today about 1.3 to 1.5 million barrels per day (bpd) of extra supply over demand," he told reporters in Tokyo after holding talks with Japanese officials about energy supplies. Japan is a major buyer of Iranian crude.

The Organization of Petroleum Exporting Countries (OPEC) pumped about 1.3 million barrels per day above its output target in March, according to the group's monthly report in April.

Saudi Arabia, OPEC's biggest producer and the world's top crude oil exporter, is pumping around 10 million barrels per day (bpd) and is storing 80 million barrels to meet any sudden disruption in supplies, Naimi said.

Worries of a supply disruption from the Middle East due to escalating tensions between the West and Iran pushed benchmark Brent crude prices over US$128 in March, a gain of over 20 percent from the start of the year.

Prices have since eased but have stayed well above US$100, keeping global fuel costs high and threatening to derail the fragile global economy.

(Reuters, Al-Akhbar)