Obama: Oil markets can handle expanded sanctions on Iran

President Obama issued a formal determination Friday that global oil supplies are sufficient to move ahead with toughened sanctions against Iran.

Obama, acting under a congressionally mandated deadline, issued a finding that’s a precursor to sanctions against foreign banks that purchase Iranian oil. The toughened sanctions are designed to reduce Iran’s oil revenues and isolate its central bank.

The determination that there are enough supplies to allow nations that import Iranian oil to find other sellers will enable sanctions to take effect as soon as June 28.

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“I determine ... that there is a sufficient supply of petroleum and petroleum products from countries other than Iran to permit a significant reduction in the volume of petroleum and petroleum products purchased from Iran by or through foreign financial institutions,” states the memo to the departments of State, Energy and the Treasury.

“I will closely monitor this situation to assure that the market can continue to accommodate a reduction in purchases of petroleum and petroleum products from Iran,” the memo adds.

A senior administration official would not comment on what effect the sanctions could have on oil prices, which have surged in recent months amid growing tensions in Iran.

“I’m not going to speculate about oil prices and how they move in part because global oil prices are set in a global market and are affected by a variety of factors,” the official said.

In making the determination, the president considered a number of factors, including current global economic conditions, spare capacity and the existence of strategic oil reserves, the official said.

“He will continue to monitor closely developments in the oil market,” the official said.

A fiscal 2012 defense programs bill enables the banking sanctions that are part of wider efforts to press Iran over its nuclear program.

The sanctions are aimed at foreign banks that knowingly conduct or facilitate transactions for the purchase of Iranian oil or petroleum products.

White House press secretary Jay Carney said the global oil market is tight, but that nonetheless, “there currently appears to be sufficient supply of non-Iranian oil to permit foreign countries to significantly reduce their import of Iranian oil.”

Here's Carney's whole statement:

The analysis contained in the Energy Information Administration’s report of Feb. 29, 2012, indicates that the oil market became increasingly tight over the first two months of 2012. That tightness remains today. A series of production disruptions in South Sudan, Syria, Yemen, Nigeria and the North Sea have removed oil from the market. In addition, international concerns over Iran’s nuclear activities and recent steps taken to reduce the amount of Iranian crude oil and petroleum product imports are contributing to an increased demand for non-Iranian crude oil.

Nonetheless, there currently appears to be sufficient supply of non-Iranian oil to permit foreign countries to significantly reduce their import of Iranian oil, taking into account current estimates of demand, increased production by some countries, private inventories of crude oil and petroleum products and available strategic petroleum reserves and in fact, many purchasers of Iranian crude oil have already reduced their purchases or announced they are in productive discussions with alternative suppliers.

This post was updated at 2:41 p.m. and 3:16 p.m.