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How High Can Oil Really Go?

How High Can Oil Really Go?

Just a couple of months…

Iran Upbeat About Oil Exports Despite Sanction Threat

Iran is confident that its oil exports will not be disrupted by the re-imposition of sanctions after the United States vowed to withdraw from the Nuclear Deal, according to Iranian Oil Minister Bijan Zanganeh as quoted by Reuters.

Zanganeh referred to the previous drop off in its oil exports courtesy of the previous sanctions “history”.

“Trump’s decision will not have any impact on our oil export,” the minister said on state television.

What the new sanctions will be is not yet known, but previous sanctions on the Middle Eastern country saw a major drop off in oil exports that other OPEC members were only too happy to lap up.

Iran has done much to ratchet up its oil production and corresponding exports after the first round of sanctions were lifted in January 2016, bringing it back into the fold as OPEC’s third largest oil producer—even at the expense of the production cut agreement it agreed to with OPEC.

Threats of new sanctions against Iran came shortly after President Donald Trump took office, and after Iran conducted ballistic missile testing, a violation of at least the spirit of the nuclear deal. The US President provided waivers until now, however, vowing in January 2018 that it would be the last time he did so.

Analyst opinion, however, contradicts Iran’s upbeat tone. Analysts polled by S&P Global Platts expect an immediate impact of less than 200,000 bpd of Iranian oil shut in, possibly rising to 500,000 bpd after six months as the deadline for sanctions approaches and the wind down period ends. Other analysts think that the reduction of Iranian exports could be closer to 1 million bpd.

Iran is the world’s fifth largest exporter at 2.5 million barrels per day, according to the IEA.

By Julianne Geiger for Oilprice.com

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  • Mamdouh G Salameh on May 11 2018 said:
    For once, I agree with the Iranian oil minister Bijan Zanganeh that Iran oil exports will not be affected by US sanctions.

    And contrary to analysts’ and bank’s projections, Iran will not lose a single barrel of oil exports. More than 75% of Iran’s oil exports go to China and the Asia-Pacific region while the remaining 25% go mostly to the European Union (EU). China, India and other Asia-Pacific region countries as well as the EU are not going to comply with US sanctions and reduce their imports of Iranian crude. While most major buyers of Iranian crude will continue to do so, Japan and South Korea might decide to comply with US sanctions and shun Iranian crude. However, this will be more than offset by increased imports of Iranian oil by China, India and other Asia-Pacific countries as well as the EU.

    The pre-Iran nuclear deal’s sanctions worked against Iran’s oil exports because of a combination of the EU’s sanctions on global insurance companies insuring Iranian oil cargoes and US sanctions on banking making it difficult for Iran to receive payments for its oil imports in petrodollar. The EU is not going to walk away from the Iran nuclear deal and therefore it will not be imposing any sanctions on Iran thus further weakening US sanctions.

    Moreover, Iran will be using the petro-yuan and also the euro for payment for its oil exports thus bypassing the petrodollar altogether and nullifying the impact of the sanctions.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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