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Why The U.S. Wants China To Stop Importing Iranian Crude

In an attempt to increase pressure on Iran in order to push through a nuclear deal with Iran, the U.S. is considering cracking down on Iranian oil exports to China.

Chart of the Week

-     The government of the United States is mulling a ban on Chinese imports of Iranian crude as it becomes increasingly clear that reaching a deal with Iran before the inauguration of its new government is unlikely. 

-    The oil markets see the U.S. somewhat unlikely to antagonize China further, yet Washington would be inclined to highlight that it has other options to opt for should the talks fail altogether.  

-    Verifiable Chinese imports of Iranian crude amounted to some 250kbpd over the course of H1-2021 according to vessel-tracking firm Kpler, a 130% increase year-on-year, largely coming on the back of Biden-era softening of rhetoric towards China.

-    A significant volume of Iranian exports, however, is routinely trans-shipped in the region of the Malacca Straits, rendering the deciphering of their final destination all but impossible. 

Market Movers

-    Brazil is expected to double its oil production between now and 2030, promoting its image as a safe-haven investment for oil and gas projects amidst shrinking international opportunities, buoying market sentiment for Petrobras (NYSE:PBR).  

-    The Italian oil major Eni (NYSE:E) has signed an agreement with Azora Capital to buy 1.2GW of solar and wind capacity in Spain, boosting its renewables footprint in the Mediterranean. 230MW worth of solar assets are already in operation, the rest comes from solar projects already being developed.  

-     ExxonMobil (NYSE:XOM) shut down its 120kbpd Slagen Refinery in Norway last month, becoming the fifth European refinery to see its operations halted for good because of pandemics-triggered ramifications. 

Tuesday, July 27, 2021

France Bans Short-Haul Flights. Sapping jet prospects in one of Europe’s largest markets, France banned short-haul flights if a direct train route of under 2h 30 min is available. In addition, it would be obligatory for all airlines to compensate for all carbon emissions during domestic flights by 2024.  

No G20 Consensus on Phasing Out Coal. Officials meeting at the G20 Environment Ministers Meeting in Naples failed to strike a deal on the worldwide future of coal, despite intense lobbying from the U.S. and the UK, Reuters reports. China, India, and Russia are seen to be most adamantly maintaining a future place for coal. 

Glencore Trader Pledges Guilty to Bribery. A former Glencore trader pleaded guilty in a U.S. federal court to funneling millions of dollars via intermediaries to bribe officials that would subsequently grant NNPC-allocated oil cargoes at favorable terms. 

Russia to Build LNG-Powered Icebreakers for the Arctic. Russia intends to build up a fleet of LNG-fuelled icebreakers to be used across the Northern Sea Route. Russia’s nuclear giant Rosatom, the supervisor of Arctic navigation, says it is mulling the construction of 2-4 medium-sized icebreakers, presumably going for LNG synergies with NOVATEK’s (MCX:NVTK) LNG projects in the Arctic.   

Asia Pacific LNG Prices Hit $14.5/mmBtu Threshold. Buoyed by buying tenders by Turkey’s BOTAS and Kuwait’s KPC, spot LNG prices have surged to multi-year highs, surpassing the threshold of $14.5 per mmBtu this week. 

Pakistan Ramps Up HSFO Imports. Against the background of exorbitantly high LNG prices in Asia, some major buyers, prime amongst them Pakistan, have started to buy up HSFO cargoes. Seeing its prices depressed throughout the year, HSFO is an almost ideal replacement for expensive gas, just as peak summer demand has hit the region.   Related: The Net-Zero Narrative Is Riddled With Holes

China Starts Anti-Dumping Probe Against Japan, SK. China’s Ministry of Commerce started an anti-dumping investigation into flat-rolled electrical steel imported from Japan, South Korea, and the European Union, reinstating tariffs vis-à-vis those states following the expiry of tariffs in place for the last 5 years, Reuters reports.

ExxonMobil Sues Iraqi National Oil Company. US oil major ExxonMobil (NYSE:XOM) filed an arbitration case against Basrah Oil Company, Iraq’s main state-owned oil-producing entity, over what it perceives to be a stalling of its divestment drive on West Qurna-1. ExxonMobil’s 32.7% share in the field (that it operates) was assumed to be sold to a third party - market rumors presume a Chinese company – however, BOC has blocked the transaction and now claims to be intent on taking over the stake itself, Argus reports. 

Vitol Hands Out 2.9 Billion to Traders. The world’s largest oil trading company has paid out a record $2.9 billion to its trading executives and staff, writes Bloomberg. With most of the profits stemming from Q2 2020 trading profits, this buyback comes on top of $2 billion of share buybacks in 2020 that were already accounted for last year. 

Copper Prices Surge Again on China Floods. Copper prospects have brightened again as benchmark LME futures continued their five-day bullish streak beyond $9800 per metric ton, amidst news of China floods, creating a double whammy of supply concerns and increasing demand to be utilized for infrastructure reconstruction. 

Greenpeace Seeks to Derail Latest North Sea Project. Greenpeace is seeking to take the UK government in court over the forthcoming 150 MMbbls Cambo project, as Britain prepares to host the COP26 Glasgow conference in November. Cambo, backed by Shell (NYSE: RDS.A) and located in harsh seas amidst complex geology, wields heavy oil of some 23-25° API and is expected to come onstream by 2025 – the government approval is expected to take place within several weeks. 

Coffee Rises Further on Brazil Cold. Another polar air mass is moving towards Brazil this week, risking to adversely impact the Latin American country’s coffee harvest, already frost-bitten several times this year and further exacerbated by the worst drought in the last 100 years. Arabica coffee futures rose 10% on Monday alone, flying above the $200 per pound level, having already gained 20% last week.

By Josh Owens for Oilprice.com

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  • Mamdouh Salameh on July 27 2021 said:
    The United States wants China to stop importing Iranian crude in order to exert pressure on Iran to agree a new nuclear deal.

    China has never stopped buying Iranian crude since US sanctions against Iran were reintroduced so it isn’t going to stop now. Moreover, China has a 25-year strategic agreement with Iran under which it will invest an estimated of $600 bn in Iran’s infrastructure and its oil and gas industry. In return, China will get guaranteed supply of Iranian crude at a discounted rate for the duration of the deal. Furthermore, Iran is an important element in China’s Belt and Road Initiative (BRI). It is estimated that China has been importing up to 1.0 million barrels a day (mbd) of Iranian crude.

    Without the United States agreeing first to lift the sanctions, Iran won’t even negotiate with the Biden administration. On the other hand, the United States won’t lift the sanctions without Iran accepting limitations on its nuclear and ballistic missile development programmes which Iran will never do and therein lies the problem.

    In my opinion, a lifting of US sanctions against Iran won’t see the light of day even by 2023 or ever. The reason is that the positions of the United States and Iran are irreconcilable.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Jim pickens on July 27 2021 said:
    The US insanity and obsession's with Iran has do to with Israel's pressure tactic and its powerful lobby on US Congress and Senate. For 40 years US has played this futile game and has lost its focus on the Russia and China. This idiotic policy toward Iran is what the future historian will write as a downfall of US hegemony and empire. Middle East and Iran have not strategic value anymore to US and the sooner US frees itself from that part of the world the sooner they can focus on the real threat which is the resurgence of Russia and the next Super power China. Biden should get back to JCPOA which was working and work with Iran to contain these powers, otherwise this road of maximum pressure and containment will only lead to nowhere as we have seen in the last 40 plus years of US animosity toward Iran.
    Iran has proven again and again that is genuinely not after Nukes yet we are pushing them toward that direction. Its time to stop listening to the so called allies in Tel Aviv and Riyadh and go after our own interest. US needs Iran to contain Russia and China and is the biggest prize in Middle East. Whomever aligns its interest with Iran will be the next sole Super power and it appears China is almost there.
  • Jim pickens on July 27 2021 said:
    The US insanity and obsession's with Iran has do to with Israel's pressure tactic and its powerful lobby on US Congress and Senate. For 40 years US has played this futile game and has lost its focus on the Russia and China. This idiotic policy toward Iran is what the future historian will write as a downfall of US hegemony and empire. Middle East and Iran have not strategic value anymore to US and the sooner US frees itself from that part of the world the sooner they can focus on the real threat which is the resurgence of Russia and the next Super power China. Biden should get back to JCPOA which was working and work with Iran to contain these powers, otherwise this road of maximum pressure and containment will only lead to nowhere as we have seen in the last 40 plus years of US animosity toward Iran.
    Iran has proven again and again that is genuinely not after Nukes yet we are pushing them toward that direction. Its time to stop listening to the so called allies in Tel Aviv and Riyadh and go after our own interest. US needs Iran to contain Russia and China and is the biggest prize in Middle East. Whomever aligns its interest with Iran will be the next sole Super power and it appears China is almost there.

Leave a comment




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