WASHINGTON (Reuters) - Global oil market conditions are ripe for the West to further pressure Iran over its nuclear program, but the window will likely close next year as fuel demand is expected to rise in Asia, a report to be released on Wednesday said.
For most of the past decade, a tight oil market limited the ability of Western countries to use sanctions to dampen the nuclear ambitions of Iran, one of the world’s top crude producers, said the report by the nonpartisan Securing America’s Future Energy and Roubini Global Economics.
In the last year, new U.S. and European sanctions targeting Iran’s crude sales came when the global oil market could handle a loss of the Islamic Republic’s crude exports. Global oil demand has been slow to recover from the recession and crude output has risen steadily from the United States and other nations outside the Organization of the Petroleum Exporting Countries.
“This opportunity will not last indefinitely,” said the report called “Decision Point: A Well-Supplied Global Oil Market Will Make 2013 the Year to Deal with Iran,” to be released at the Harvard Club in New York on Wednesday.
“The window of opportunity in which the market can comfortably withstand the loss of additional Iranian oil while minimizing oil price volatility and damage to the global economy,” extends no farther than mid-2014, said the report which also received input from John Hannah, who was a national security adviser to former Vice President Dick Cheney.
The sanctions introduced last year by the West aim to choke Tehran’s funding of its nuclear program by targeting the country’s oil exports. The West believes Iran is developing weapons, a charge Tehran denies.
The new sanctions halved Iran’s oil exports in 2012 by more than 1 million barrels per day, about the amount that oil production grew in the United States during that time.
After September 2013 oil demand growth is expected to accelerate in China so now is the time to further pressure Iran, the report said.
The report did not recommend what kind of action to take on Iran but stronger measures could be coming. Lawmakers in Congress have urged tougher sanctions on Iran. U.S. President Barack Obama has said that all options are on the table in dealing with Iran.
U.S. Vice President Joe Biden said last week that Obama was not bluffing about using force to thwart Iran’s nuclear ambitions if all else fails. Biden said all options, including sanctions and diplomacy, must be exhausted to ensure that the global community will be supportive if a military strike is deemed necessary.
The report recommended that the United States and the European Union should be prepared to use strategic oil stockpiles if actions are taken to clamp down on Iran’s exports.
Last year, before oil prices eased, leaders of the Group of Eight major economies signaled their readiness to tap into emergency oil stockpiles if the sanctions on Iran threatened to strain supplies.
Reporting by Timothy Gardner; Editing by Lisa Shumaker