Just a few days before U.S. sanctions on Iranian oil exports return on November 5, the keywords about how much of Iran’s oil will come off the market are ‘lack of clarity’.
On the one hand, it’s unclear how much Iranian oil will really be removed from the market, considering that Iran has already started to switch off transponders on board of some of its cargoes, although ship-tracking data on the tankers that can be tracked shows that Iranian oil exports are falling, but not as steeply as the market and analysts were expecting just a month or two ago.
On the other hand, it’s unclear whether the United States would grant any waivers, with U.S. Administration officials giving mixed signals.
Yet, one thing is clear, and here analysts were right—Iran’s top two single largest oil customers, China and India, will continue to import Iranian crude. Although China and India’s Iranian oil intake in recent months has fluctuated, and although some of their companies most exposed to the U.S. financial system have drastically reduced or outright stopped imports from Iran (like India’s Reliance Industries), the countries saw their imports in the first three weeks of October increase or hold steady around the volumes from recent months.
According to S&P Global Platts trade flow data, Iran’s oil shipments to China between October 1 and 21 averaged 800,000 bpd, up from around 600,000 bpd average for September. Last year, average Chinese imports of Iranian oil were 602,500 bpd, Platts has estimated.
About half of China’s crude oil and condensate imports from Iran in October, around 400,000 bpd, were bound for a storage hub in Dalian in northeastern China, according to Platts sources and shipping data. The National Iranian Oil Company (NIOC) has reportedly leased some storage capacity at Dalian.
Iran’s oil flows to India were 600,000 bpd in September and are estimated at around 500,000 bpd in October, Platts oil flow data suggests. Related: Can Russia Relieve The Iranian Oil Crisis?
India has told the U.S. that it would be impossible for India until at least next March to stop importing Iranian oil—which is cheaper than alternatives—because of India’s rising energy bill and weaker currency, an Indian government source told Reuters earlier this week.
“We cannot end oil imports from Iran at a time when alternatives are costly,” the source told Reuters.
The U.S. has reportedly broadly agreed to grant India a waiver from the sanctions, after Iran’s second-largest oil customer had agreed to reduce Iranian imports by a third in 2018-2019, India’s The Economic Times reported on Thursday, citing sources familiar with the issue.
Earlier this week, Robert Palladino, Deputy Spokesperson at the U.S. State Department, said at a briefing:
“Our goal remains to get to zero oil purchases from Iran as quickly as possible. That’s not changed. And we are determined to implement our policy of maximum pressure on Iran, and that’s our strategy. But we are prepared to work with countries that are reducing their imports on a case-by-case basis. The United States government currently is in the middle of an internal process to consider significant reduction exemptions for individual countries.”
The lack of clarity about U.S. waivers from sanctions, who’s getting such waivers (if at all), and how much reductions would be required for possibly winning a waiver, has been clouding the outlook for Iran’s oil supply to the market, while the sanctions snap back in just four days. Related: The Clock Is Ticking: How Much Oil Will Iran Lose?
In the first three weeks of October, Iran’s crude and condensate exports averaged around 1.90-1.95 million bpd according to Platts ship tracking data, but exports could be even higher due to the Iranian tactic to switch off tracking devices to conceal some volumes and destinations of its oil exports, sources say.
Iranian exports that can be tracked dropped to below 2 million bpd as early as in August, and analysts expected at the time that further steep drop-offs were imminent. However, Iran’s crude and condensate exports held at 1.9 million bpd in September, according to EIA estimates based on data from ClipperData.
That’s significantly lower than the peak of 2.7 million bpd in June this year, but still stubbornly high compared to some analyst estimates that the predicted sanctions could possibly choke off close to 2 million bpd of Iran’s oil exports.
Lack of clarity is still dominant regarding both Iranian exports and potential U.S. waivers, but Iran’s top two oil buyers—China and India—are not bringing their imports down to zero.
By Tsvetana Paraskova for Oilprice.com
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