BP says Iran oil bans to trigger extreme price volatility

10 October, 2018, 20:55 | Author: Eric Barnett
  • India buying Iran oil in defiance of Trump sanctions

While India wants to continue importing Iranian oil, albeit a reduced volume, US Secretary of State Mike Pompeo last month stated that Washington would consider waivers on the embargo but made it clear that these would be time-limited, if granted.

United States crude was down 0.7 percent at $73.80 a barrel. "We will be guided by our national interest", he said.

"I don't think anyone believed it was technically possible to go to zero in six months if we wanted to replace Iranian oil barrel for barrel from other suppliers, ensuring the price of oil doesn't spike and ensuring that the brunt of our sanctions pressure falls on Iran rather than our allies", said Richard Goldberg, a former senior Senate staffer who helped write the original Iran sanctions legislation.

The country previously held oil in storage at Dalian during the last round of sanctions in 2014 that was later sold to buyers in South Korea and India.

"Refiners have placed November nominations to lift 1.25 million tons (about 9 million barrels) of oil from Iran", Reuters quoted a source as saying.

For weeks, crude oil has been underpinned and driven higher by USA sanctions set to target Iran's crude oil exports during the first week in November, and the Trump administration has been leaning on governments and global companies to cut their imports to zero.


Singh said options for paying for Iranian oil are under discussions. "We do not know if we will get a waiver (from USA sanctions) or not". This likely means we won't see any serious buying this week unless the price is right. Last week, the Saudis hastened to inform the market that they are now pumping 10.7 million bpd-just shy of the all-time record high-and could even tweak that 10.7 million "slightly higher" next month.

"In particular, both India and China continued to import crude from Iran, even though they had to cut down volumes significantly".

"These officials are planning to announce that it's OK to give banks waivers because re-imposed sanctions on businesses are sufficient", the source explained.

Oil prices have extended a rally on expectations the sanctions will test the Organization of the Petroleum Exporting Countries and other producers.

Iran may indeed have not cut production yet to match the rate of decline in its exports, as the country appears to be storing more oil on ships as it did during sanctions that applied until the 2015 nuclear deal.

Besides blocking of banking channels from November, the absence of payment mechanism may pose a challenge to the transportation of the oil as Iranian crude is bought on a CIF basis and shipped on Iranian tankers.

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