Iran threatened to block the Strait of Hormuz if it was not allowed to use the strategic waterway through which around a fifth of oil that is consumed globally passes. This came after the US announcement that it will end exemptions awarded last year to eight buyers of Iranian oil, demanding them to stop purchases by May 1 or face sanctions.
The US Secretary of State Mike Pompeo announced on April 22 that the United States will end all exceptions for countries currently purchasing oil from Iran. As he specifically, said the country will no longer grant any exceptions. ‘We’re going to zero across the board’. Countries that had previously bought Iran’s crude oil have been transitioning to new suppliers.
OPEC crude production reduced by 240,000 b/d in February to 30.68 million b/d, which is the lowest level in 4 years. According to Gibson Shipbrokers, February numbers indicate a significant over compliance, with Saudi Arabia leading efforts to implement cuts with a 153% compliance rate, some 170,000 b/d already below their overall target.
Indian refiners are to lift 8 million barrels of Iranian oil in April, a decrease of 12% in comparison to March because the nation is under discussions with the US to renew the waiver from US sanctions against Tehran, Reuters reports.
The Swedish Club has previously advised that sanctions against Iran cause payment problems because banks have proven reluctant to make any payments having even a connection with Iran notwithstanding that the payment may be perfectly legitimate. In line with its previous announcement, the Club now informed that the problem is not isolated to Iran.
Trump administration has moved forward, imposing new financial sanctions on Venezuelan state oil firm PDVSA, as part of a pressure campaign to make the government of Venezuelan president Nicolás Maduro step down. The new US measures aim to affect the pattern of petroleum shipping in the Caribbean and beyond, since the US has trade relations of oil and refined products with Venezuela.
South Korea did not import Iranian oil for the fourth consecutive month in December, after the reimposition of US sanctions. In fact, South Korea cut its 2018 imports from the major supplier by 60%. Currently, Saudi Arabia is the top oil supplier, as it delivered 43.60 million tonnes of crude in 2018.
The United States has granted temporary exemptions to China, India, Italy, Greece, Japan, South Korea, Taiwan, and Turkey allowing them to continue buying Iranian oil. More than 20 importing nations have zeroed out their imports of crude oil from Iran.
Iran’s crude oil exports and production have declined since the May 2018 announcement by the United States that it would withdraw from the Joint Comprehensive Plan of Action and reinstate sanctions against Iran, according to EIA. In September, Iran’s crude oil and condensate exports fell to 1.9 million b/d.
EIA forecasts Brent crude oil spot prices, which averaged $79 per barrel in September, to average $81/b in Q4 2018, before falling to an average of $75/b in 2019. However, the effects of US withdrawal from JCPOA, re-imposition of sanctions on Iran, and potential response from OPEC pose uncertainty.
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