Russian energy minister Alexander Novak said Thursday geopolitical tensions, including potential re-imposition of Iranian sanctions, has added $5-$7 a barrel to the oil price.
Oil prices have reached their highest since November 2014, with Brent crude piercing the $80 a barrel level at various points in the past week as supply risks related to Venezuela and Iran have buoyed on the market.
"Without doubt, the market is reacting sharply to such announcements as the US withdrawal from the nuclear deal, and this means uncertainty regarding Iran's production. In my view, from $5/b to $7/b in oil price today is risks associated with the situation in Iran," Novak said in an interview with the Echo Moskvy radio station.
OPEC's third largest producer will be a key talking point when OPEC and 10 other oil producing countries meet in late June, after the US decided to reimpose sanctions on Iran from November 5.
Novak said at the St Petersburg International Economic Forum Iran would be discussed "only from the point of view of possible risks to output reduction".
A freefall in crude production in Venezuela is also impacting oil prices as it is influencing the pace of stock reduction due to which the oil price currently "is somewhat above what we forecast," Novak said.
Iran had a 1 million b/d drop in crude output the last time sanctions were imposed. But this time the US has acted unilaterally.
OPEC ministers have been trying to play down fears over supply risk in recent weeks, with Saudi energy minister Khalid al-Falih and OPEC president and UAE energy minister Suhail al-Mazrouei saying the oil market remains well-supplied, with the recent price rise driven by geopolitics, not fundamentals.
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"The two ministers voiced their concerns about recent market volatility, fueled by anxiety over geopolitical events despite the availability of ample supply," the recent statement said.
Novak also said Russia plans to continue cooperation with Iran despite the US sanctions, although "a lot will depend on the final decision on this issue," Novak said.
"We have long-lasting friendly trade and economic relationship with Iran and we continued to work with them when previous tough sanctions were introduced," he said in the interview.
Russia will need "to study legal aspects of the decisions and wait for final reactions. But generally we intend to continue the cooperation," Novak said.
He also reiterated that obligations under the 1.8 million b/d OPEC/non-OPEC output cut agreement may be lowered if the participants come to the conclusion at the June meeting the market has rebalanced.
For Russia, stability is more important than a short-term significant growth in price, he said in the interview.
According to the IEA in its May report, OECD oil stocks fell below the five-year average level in March for the first time since 2014, by 1 million barrels, representing the main benchmark for the success of OPEC/non-OPEC production cuts agreed in November 2016 and in place since January 2017.
