New York Excluding Iran from the global oil market would widen the shortfall between worldwide supply and demand six-fold, based on February production and consumption estimates, the US Energy Department said.
Global fuel use would averaged three million barrels a day more than output when Iran is excluded from the calculations and 500,000 more when Iran is included, the department's Energy Information Administration (EIA) said in a report on Wednesday.
The examination of oil and fuel supplies and prices with and without Iran was prepared to help guide President Barack Obama's administration in determining the feasibility of imposing sanctions related to Iranian oil trades through its central bank.
The report was the first assessment issued under a December 31 law that requires the EIA to provide an update on oil market conditions every 60 days.
"The EIA report highlights how tight the global market is," Trevor Houser, an energy analyst and partner at Rhodium Group, a New York-based economic research firm, said in an interview.
"With oil inventories and spare Opec production capacity running low, consumers don't have much buffer against additional disruptions in supply."
Spare oil production capacity by the Organisation of Petroleum Exporting Countries (Opec) dropped 33 per cent in the first two months of this year compared with same period in 2011, the report showed.
The 12 Opec members had an average 2.5 million barrels a day spare capacity during January and February, down from 3.7 million a year earlier.
A month from now, the president must make a determination based on the EIA report as to whether there is enough non-Iranian oil available to impose sanctions related to oil transactions with the central bank starting on June 28, according to the law.
The president has the authority to grant exceptions to countries that have significantly reduced the volume of Iranian oil purchases, and he may delay the implementation of sanctions if he determines, based on the Energy Dep-artment reports, that there is insufficient alternative supply to make up for the loss of Iranian barrels.
The president also may waive sanctions if he determines it is in the US national interest to do so.
Oil in New York surged to $109.77 a barrel in New York on February 24, the highest settlement since May 3, as tensions escalated over Iran's nuclear programme. While Iran has said its atomic programme is for civilian purposes, the US and its allies say the country is trying to develop the capacity to produce nuclear weapons. Crude rose 8.7 per cent to $107.07 a barrel in February.
"While the report shows what we've seen at the pump — some volatility in oil prices because of a variety of factors, including Iranian posturing — it also shows that there is spare capacity to offset a decline in the production and sale of Iranian crude," Senator Bob Menendez, a New Jersey Democrat who was a lead sponsor of the sanctions legislation, said in an email Thursday.
Following a November 8 report by United Nations inspectors that raised questions about Iran's nuclear program, the US and European Union have added increasingly stringent economic penalties, including US sanctions on non-petroleum transactions with the Iranian central bank that take effect yesterday and an EU embargo on Iranian oil that starts July 1.
An array of restrictions on banking, shipping, insurance, ports, trade, commodities and energy transactions and ventures have severed or complicated many of Iran's commercial ties to the outside world.
Iran, the second-biggest oil producer in Opec, pumped 3.45 million barrels of oil a day last month, the lowest level since September 2002, according to data compiled by Bloomberg News, and exported an average 2.58 million barrels a day in 2010, according to Opec statistics.
Turkey, which relies on Iran for half of its oil imports, is seeking to replace Iranian crude with purchases from Libya, the North African producer's state-run National Oil Corp said on its website.