US moves to ease oil price fears

The US has been working with oil producers to ensure that global supplies flow smoothly and ease concerns about a cut-off of crude from Iran, which faces tougher sanctions for its suspected pursuit of nuclear weapons.

US Deputy Secretary of Energy Daniel Poneman said yesterday that Washington had been in talks with oil importers to find alternatives to Iranian supplies and would work to avoid price shocks.

Countries such as South Korea, the world's fifth-largest oil importer, have warned that they would find it difficult to replace Iranian supplies.

Many are concerned that pressure from sanctions could lead to higher oil prices.

"We are working with nations that produce and consume oil to study ways in which we can make sure that as countries reduce their purchases of Iranian oil, the weight of that burden falls on Iran, not the rest of the world," Poneman said.

"The idea is to do this in a manner that does not hurt the growth of any of our countries," he said.

Major importers of Iranian oil were long loath to embargo the lifeblood of Iran's economy because of fears this would send oil prices rocketing at a time when they could least afford it due to debt and deficit crises and high unemployment.

But strong momentum for oil sanctions has been created by a UN watchdog report, which said Iran appeared to have worked on designing an atom bomb.

A law signed by US President Barack Obama on New Year's Eve would freeze out of the US financial system any institution dealing with Iran's central bank, which processes the country's oil revenues.

"We have worked very hard with producer nations to ensure that the market is well supplied, and all the indications that we have suggest that is in fact the case," Poneman said.

He said there was sufficient additional capacity in the market to make up for cuts in Iranian supply.

Saudi Arabia, the world's top oil exporter and the only producer with significant spare capacity, said it could lift its output at a moment's notice.