The removal of Iranian oil exports from the global market by November, as the U.S. has asked from its allies, is impossible, an oil official in Iran told the semi-official news agency Tasnim on Wednesday.
“Iran exports a total of 2.5 million barrels per day of crude and condensate and eliminating it easily and in a period of a few months is impossible,” the Iranian official was quoted as saying.
Earlier this week, the U.S. asked its allies to cut oil imports from Iran to “zero” by early November when the U.S. sanctions on Tehran return, causing oil prices to rise on expectations that more Iranian barrels could be taken off the market than expected as the U.S. Administration looks determined to choke off as much Iranian oil exports as possible.
“The U.S. is continuing its decision to completely isolate Iran,” Gene McGillian, vice president of market research at Tradition Energy, told CNBC.
“They’re ringing the bell even louder.”
Iran doesn’t expect that the United States will grant sanction waivers to companies to import Iranian oil, and Iran is “trying to find new customers,” Iran’s Oil Minister Bijan Zanganeh said in an interview with Bloomberg on Friday.
“We are going to find some other way,” said the minister who added that Iran’s oil exports are close to 2.5 million bpd for June. Related: Oil Prices Spike Despite Saudi Plan For Unprecedented Oil Export Surge
Iran’s single biggest oil customer, China, has not yet seen any impact from the returning U.S. sanctions, and Chinese oil purchases from Iran are moving in line with demand, a senior executive at Sinopec told Platts on Tuesday.
Oil customers in China use ships that don’t have any exposure to the United States for importing Iranian crude oil, so the business has not been affected by the sanctions, the Sinopec executive said.
However, the U.S.-China trade spat and the Chinese threat to impose a 25-percent tariff on U.S. crude oil imports might make American oil unviable for sale in China. “We may have to stop,” the Sinopec executive told Platts.
By Tsvetana Paraskova for Oilprice.com
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The fact that the US government is asking its allies to completely halt oil purchases from Iran signifies a lack of confidence on the part of the Trump administration that the sanctions will work this time.
Iran’s single biggest oil customer, China, has no reason to comply with US sanctions particularly in the current tense atmosphere between them. And with the U.S.-China trade spat and the Chinese threat to impose a 25-percent tariff on U.S. crude oil imports, China’s Iranian oil imports could only go up.
Russia has every reason to ignore US sanctions against Iran and to continue to implement the oil-for-goods barter trade agreement with Iran having been subjected to US sanctions against it since 2014. As for the European Union (EU), it already made its position clear that it will continue to buy Iranian crude.
Iran’s trump card is the petro-yuan which has virtually nullified the effectiveness of US sanctions.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London