With Crude Elevated U.S. Actively Considering Iran Oil Sanction Waivers

Both the U.S. and Iran are in a tight spot with Iran’s imploding economy and impending isolation oil prices have soared to 4 year highs. Iran plans to use private companies to counter sanctions. With high oil a risk to the global economy the US is considering waivers.

Both the U.S. and Iran are in a tight spot with Iran’s imploding economy and impending isolation oil prices have soared to 4 year highs. Iran is planning to use private companies to counter sanctions. With high oil a risk to the global economy the US is considering waivers.

Reuters reported on Friday that the Trump administration is actively considering waivers on sanctions it will reimpose on November 4 for countries that are reducing their imports of Iranian oil, a U.S. government official said on Friday.

The sanctions aim to force Tehran to stop its involvement in conflicts in Syria and Iraq and halt its ballistic missile programme. The U.S. administration is “in the midst of an internal process” of considering exceptions called SRE waivers, or significant reduction exemptions, said a government official, who spoke on the condition of anonymity to Reuters

Reuters added that this was the first time a U.S. official said the administration was in the process of considering waivers. The report comes after WTI Crude oil soared on Wednesday despite the EIA reported a massive build in storage as speculators swept prices higher on Iranian risk.

India on Thursday said that they will buy 9 million barrels of Iranian oil in November, two industry sources told Reuters. This indicates that India, the world’s third-biggest oil importer will continue purchasing crude from Iran despite U.S. sanctions coming into force on Nov. 4.

“Refiners have placed November nominations to lift 1.25 million tonnes (about 9 million barrels) of oil from Iran,” one of the sources said.

Secretary of State Mike Pompeo said in India last month that the U>S> administration would consider waivers and that some buyers of Iranian oil would take a “little bit of time” to unwind their trade with Iran. A more aggressive tone however came from White House National Security Adviser John Bolton who said on Thursday that the administration’s objective was that there be no waivers and “exports of Iranian oil and gas and condensates drops to zero.”

Bolton said the administration is “prepared to work with countries that are reducing their imports on a case-by-case basis,” the official said. The key in the “actively considering waivers” comments is importers who are reducing their imports. This gives wiggle room for the U.S. to change its stance. 

The U.S. has little option in the short term with trade war escalating against China, China said a long time ago they will keep buying Crude from Iran. India indicated they will also Thursday on Thursday and finally the U.S. economy is vulnerable with yields soaring pressuring consumers and businesses. High oil prices over $70 on top of higher rates with the Fed raising and indicating they will continue. This is not a time to see what happens.

The U.S. is producing oil at record highs as is Russia and Saudi Arabia is increasing production with Iraq and Libya. The oil price is high on perception that spare capacity is at risk because Iran oil off the market. Specific waivers would take some air out of that and still have a massive impact on Iran. High oil prices also benefit Iran which is what many pundits forget.

After the U.S. dumping of the treaty Reuters reported that to counter the sanctions Iran will allow private companies to export crude oil. This comes after U.S. President Trump and the King of Saudi Arabia agreed that the Kingdom would pump up to 2 million bpd to counter supply shocks and high prices. President Trump then followed up on the FOX morning show the next day to the downside of the Iran deal is oil. He said it is in the Arabian countries interest, they have to pump more oil as Iran is their enemy. 

Trump’s reassertion of the nead for KSA and others to produce more came after Iran affectively pleaded with regional rival Saudi Arabia not to break output agreements. Iranian Oil Minister Bijan Zanganeh sent a letter to OPEC asking its members to stick to the group’s agreement reached just over a week ago last month and “refrain from any unilateral measures” that could undermine the unity of the producer group.

“Any increase in the production by any member country beyond commitments stipulated in OPEC’s decisions … would constitute breach of the agreement,” Zanganeh wrote in his letter, seen by Reuters and also reported by state media on Sunday. 

One could argue Trump got the response he was looking for from Iranian leadership. Iran has never got away from its aggressive rhetoric is this banal threat to Saudi Arabia shows.

Jahangiri said: “Anyone trying to take away Iran’s oil market (share) would be committing great treachery against Iran and will one day pay for it.”

Iran is looking at ways to keep exporting oil as well as other measures to counter sanctions after the United States told allies to cut all imports of Iranian oil from November.

“Iranian crude oil will be offered on the bourse and the private sector can export it in a transparent way,” First Vice President Eshaq Jahangiri told an economic event in Tehran broadcast live on state television.

He added referring to Iran’s oil and petrochemicals bourse, which is part of its mercantile exchange. 

“We want to defeat America’s efforts … to stop Iran’s oil exports. Oil is already being offered on the bourse, about 60,000 barrels per day, but that has been only for exports of oil products,”.

 Iran has enjoyed the benefits of being back in the ‘legal’ oil business. Iranian crude exports to China rose to the highest levels since sanctions. Iran crude and condensate exports to China continued to grow. Now Iran finds itself potentially as a pawn in the China-U.S. trade war and potentially the end of OPEC. Iran has benefited from the Russian and OPEC cuts and supply problems in Venezuela.  Iran was exempted from the OPEC production cut deal. 

South Korea in August last year passed India as the second-biggest buyer of Iranian crude for the first time since January 2016. Taiwan and Japan are the other Asian buyers. Exports to the Middle East, nearly all to the UAE, stays around 111,000 bpd. The main European buyers are Turkey wand Italy.

Iran has been aggressive since sanctions to increase market share, they will remain aggressive in trying to maintain their oil revenue as the country appaears to be impoding from the collapse of it’s currency. The choice appears to come to the negotiating table with the U.S. or continue to walk the dangerous line it is on. 

From what we see is Iran is the weak hand in a game of cards with the U.S., China, Russia and Saudi Arabia. 

Source: Reuters

From the TradersCommunity Research Desk

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