After an initial hesitance over how the returning U.S. sanctions will affect Iran's oil buyers, European refiners are beginning to wind down purchases from Iran after tanker providers, insurers, and banks began to shun Iranian deals and destinations for fear of exposing themselves to secondary sanctions.
Several large European companies in France, Spain, Italy, and Greece are reportedly admitting that they won't risk U.S. sanctions and are unable to find tankers and insurer providers willing to facilitate shipments of Iranian oil to Europe, Reuters reported on Wednesday, citing company and trading sources.
Iran's total oil exports have averaged around 2.5 million bpd in recent months, peaking in April, just before the U.S. withdrew from the Iran nuclear deal. Iran says that its May oil exports were higher than this year's average, but it now looks like European refiners are choosing not to risk and have started to figure out ways to wind down Iranian oil purchases.
Iran's oil exports to Europe account for around one-fifth of the total, while most of the Iranian crude goes to China and to India.
"We cannot defy the United States," a senior source at Italy's Saras, which operates a 300,000-bpd refinery on the island of Sardinia, told Reuters.
"It is not clear yet what the U.S. administration can do but in practice we can get into trouble," the source noted.
France's supermajor Total will not be requesting a waiver from the U.S. to continue trading oil with Iran after the 180-day wind-down period ends on November 4, according to people with direct knowledge of the issue who spoke to Reuters.
But Spain's Cepsa hopes that it could get a six-month waiver, an industry source close to the company said.
The risk of 'getting into trouble' adds to the unwillingness of tanker operators, banks, and insurers to get involved in Iranian trade, which makes purchasing Iranian oil even more complicated.
"It's a matter of finding a tanker and an insurer that will cover it. It's definitely not easy right now," a source at Repsol told Reuters.
According to trading sources, the Iranian barrels to Europe can be replaced by Russia's Urals and oil from Saudi Arabia.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More