Global oil markets are “very well supplied,” the head of the Organization of Petroleum Exporting Countries said, while Saudi Arabia, the group’s largest member, said it’s able to deal with any future shortages.

OPEC, responsible for 40 percent of world oil output, is pumping about 30.6 million barrels a day, Secretary-General Abdalla El-Badri said Monday in a speech at Chatham House in London. There’s unlikely to be any disruption to shipping in the Persian Gulf, as threatened by Iranian officials in response to a European embargo on the country’s oil exports, he said. Saudi Arabia has capacity to fill in any supply gaps that emerge, the country’s oil minister, Ali Al-Naimi, said at the same event.

“It is because of our ongoing investment that Saudi Arabia is able to respond to shortages around the world,” al-Naimi said, citing disruptions to Libyan oil production last year. “Any future shortages will be handled.”

The European Union imposed a ban last week on the import of Iranian crude to take effect on July 1. The region is Iran’s second-largest customer after China, absorbing 450,000 barrels of the nation’s crude a day, according to the Energy Department. Iranian officials, including the vice-president, have said they may react by closing the Strait of Hormuz, an access route from the Persian Gulf through which 20 percent of global oil supplies flow each day.

It would be an “impossible task” to replace this supply if the waterway were obstructed, el-Badri said.

OPEC members in the Middle East and North Africa are spending $200 billion on more than 80 projects to add new production capacity through 2015, el-Badri said. Saudi Arabia’s growing domestic energy consumption won’t hurt the kingdom’s ability to act as an oil exporter as it will meet local demand by developing natural-gas resources, al-Naimi said.

Saudi Arabia expects to produce 16 billion cubic feet of gas a day by 2020, compared with 10.7 billion cubic feet last year, al-Naimi said.

OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. The group is next due to meet in June.

Talks may begin on formally re-incorporating Iraq into the group’s production target, from which it has been exempt for more than a decade, by the middle of next year, el-Badri said.

Brent crude futures fell as much as 0.6 percent to $110.80 a barrel on London’s ICE Futures Europe exchange. 

(Bloomberg)