• 4 minutes Your idea of oil/gas prices next ten years
  • 7 minutes WTI Heading for $60
  • 13 minutes Could EVs Become Cheaper than ICE Cars by 2023?
  • 6 hours Is California becoming a National Security Risk to the U.S.?
  • 23 hours Pence says South China Sea Doesn't Belong To Any One Nation
  • 1 day Anyone holding Nvidia stock?
  • 13 hours Why does US never need to have an oil production cut?
  • 2 days UK Power and loss of power stations
  • 1 day Germany Discusses Lifting Ban on Deporting Syrians
  • 1 day China Claims To Have Successfully Developed a Quantum Radar That Can Detect 'Invisible' Fighter Jets
  • 5 hours US continues imports of Russian gas which it insists Europe should stop buying
  • 2 days OPEC Builds Case For Oil Supply Cut
  • 2 days At U.N. climate talks, US Administration Plans Sideshow On Coal
  • 2 days I Believe I Can Fly: Proposed U.S. Space Force Budget Could Be Less Than $5 Billion
  • 2 days Good Sign for US Farmers: Soybean Prices Signals US-China Trade Deal Progress
  • 2 days Plastic Myth-Busters
Alt Text

A New Era For Mexican Energy

Mexico’s new President is just…

Alt Text

Big Oil Wins Ballot Initiatives In Colorado, Washington

Tuesday’s energy-restricting ballot initiatives were…

Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

More Info

Trending Discussions

Asia Braces For Much Tighter Oil Markets

Two months before the U.S. sanctions on Iranian oil exports go into effect, Asian refiners and traders are beginning to line up their purchases for cargo loadings for November.

On September 3, the crude oil trading cycle rolled to the month of November, and sentiment in the Middle East crude trade sharply changed. Asian buyers—whose oil purchases from the Middle East are priced off the Dubai and Oman benchmarks—are anticipating tighter supplies of medium and heavy sour crude grades from November onwards, when the U.S. sanctions are expected to stifle at least part of those Iranian barrels flowing to Asia.

The market’s expectations of reduced flows of both medium and heavy sour grades from Iran lifted the Middle East crude structure at the start of September, sending the November Dubai cash and swap spread surging. This spread between Dubai cash and Dubai swap—a monthly cash-settled swap based on the Platts daily assessment price for Dubai Crude—is generally viewed as an indicator of market sentiment in the Middle East sour crude market.

The expected decline in Iranian sour supplies is a primary metric for traders in Middle East crude these days, S&P Global Platts says in an analysis, citing market sources.

Demand for medium and heavy sour grades has risen sharply in recent weeks, resulting in narrower discounts of those grades compared to lighter grades.

While Asia currently has a lot to choose from among the lighter and sweeter grades, including light oil from the United States, the North Sea, and West Africa, supplies of heavier and sour grades may tighten after the U.S. sanctions on Iran return.

Related: Say Goodbye To Cheap Oil… For Now

Various analyst estimates point to a loss of 500,000 bpd or even more than 1 million bpd as Iranian exports are choked off thanks to the sanctions.

Initial data from Iran’s August oil exports points to already diminishing sales, as some buyers cut their exposure to Iranian crude and seek alternative supplies. Others are scaling back their imports but are hoping to secure a waiver from the United States.

Between August 1 and 16, Iran’s oil exports plunged by 600,000 bpd compared to July loadings, Platts preliminary tanker tracking data showed.

According to ship tracking data compiled by Bloomberg, Iranian oil and condensate exports fell below 2.1 million bpd in August—the lowest levels since March 2016, with crude oil exports at their lowest since January this year.

Iran’s key customers in Asia—no.1 China and no.2 India—are not expected to cut off their imports of Iranian oil, although India may reduce some of its Iranian intake as it tries to maneuver between cheap Iranian crude and the U.S. pressure to restrict Iran’s oil exports to zero.

China has said that it would not stop buying Iranian oil, but Beijing is also said to have agreed not to increase its oil purchases from Iran.

While initial estimates of Iran’s oil export losses were closer to 500,000 bpd, now more analysts are expecting that the losses could even surpass 1 million bpd.

The market will lose “well over 1 million” bpd from Iran with the sanctions, and “that can’t be made up,” John Kilduff of Again Capital told CNBC on Tuesday, expecting WTI Crude prices at the end of this year to reach between $85 and $90 per barrel, with Brent Crude between $95 and $100.

RBC Capital Markets expects the losses of Iranian oil to exceed 1.2 million bpd in the first quarter of 2019, and Iran’s reaction to the U.S. sanctions in November could lead to some sort of “unintended military escalation,” which the markets are currently underestimating.

Related: Oil Prices Inch Lower After API Reports Minor Crude Draw

The ‘fear price premium’ in the oil market could return later this year due to the Iran-U.S. standoff, according to RBC Capital Markets analysts led by Helima Croft.

The sanctions on Iran, combined with Venezuela’s plunging production and possible sudden outages in African producers Libya and Nigeria, could tighten the market in the latter half of the year, RBC said in note carried by CNBC.

Referring to Iran and Venezuela, the RBC analysts said:

“These two producers alone represent a very real supply gap risk of nearly two million barrels, and we continue to caution that an additional 500 kb/d is credibly at risk for periodic outages in Libya and Nigeria, as the security situation in both countries remains fragile and upcoming elections could bring additional unrest.”

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment
  • dgg on September 06 2018 said:
    But spare capacity doesn't matter....
  • Frank on September 08 2018 said:
    Chinese demand is flat.
    US production is through the roof.
    Everyone is scrambling to pump the last decade of oil.
    How does that equate to tight supply any time before 2020-22?

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
-->