"I think it is going to be 45 days of extreme volatility, it could spike up, it could also go the other way," he added.
It is hard to be precise over how much of Iran's production will be affected by the sanctions. It largely depends on whether the country's oil-buying customers are afraid of secondary sanctions from the US if they do business with Iran. BP's competitor Total announced in August that it was pulling out of a giant oil and gas project in the Islamic republic.
But BP and Serica Energy were granted a new license Tuesday to run a North Sea gas field partly owned by Iran showing the US is willing to make some exemptions to the reach of the sanctions.
"If waivers were granted to others, to big oil consuming countries, you could see it (the price) go down, there is a lot of uncertainty right now," Dudley said.
Some analysts predict as much as 1.5 million barrels per day could be removed from the market, an event that could cause prices to rise further. On Wednesday, Brent crude futures were trading at $84.96 per barrel while US West Texas Intermediate was trading at $74.92.
Dudley did not see demand falling as a result of high prices due to global GDP growth (seen at 3.7% in 2018 and 2019 by the International Monetary Fund) still being robust. "It is still growing, demand, it might be a little bit off but we do not see that destruction yet," he said.
"You look at the GDP (gross domestic product) growth in the world and that's a very indicator on the demand growth for oil and it has been for decades and decades so … If you start to see half a percent come off GDP growth around the world, it might be a 200,000 barrel a day drop in demand, the way our economists view it, and it is not that much," he said.
MR/PR
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