For the past six months or so, the world has had time to assess the effects of U.S. sanctions on Iranian oil exports. Interestingly, the prospect of a tighter global supply has resulted in lower oil prices, according to Market Watch.
On May 8, President Donald Trump announced he would end U.S. participation in the Joint Comprehensive Plan of Action, a 2015 pact. The pact was meant to curb Iran’s nuclear activities. Doing so set Trump on the path to re-imposing sanctions on Iranian oil after an 180-day period when other countries were given time to stop imports of oil from Iran.
By early October, oil prices had climbed to their highest level since 2014 but then began a decline. As of Friday, U.S. benchmark crude had declined 17 percent. At $63.14 a barrel, they’re also down nearly 9 percent from the day Trump announced the sanctions.
“I think we went from being too worried about losing Iranian oil to now being too complacent,” says Phil Flynn, a senior market analyst at Price Futures Group. Many traders believe that global production “can fill the Iranian void” if world economies slow down, as some expect.
However, Flynn says that if traders’ predictions on a global economy slowdown prove to be wrong, the market will get “caught short oil supply, causing a price spike.” Now that November 5 is here, traders will have a tough time determining just how much oil is on the market.
“The problem for all of us trying to forecast the prices is knowing how much oil is coming off the market,” says James Williams, an energy economist at WTRG Economics.
Iranian oil exports to drop to zero
On Friday, U.S. Secretary of State Mike Pompeo announced that eight countries would be allowed to “temporarily” import Iranian oil, but for a limited time. Pompeo said the eight jurisdictions are getting the waiver “only because they have demonstrated significant reductions in their crude oil and cooperation on many other fronts.”
China, India, South Korea, Turkey, Italy, the United Arab Emirates, and Japan have been top importers of Iranian oil, and Taiwan has been an occasional importer. Turkey has been told it will be allowed to continue to buy Iran’s oil, according to Reuters, but only if it does not pay in U.S. dollars.
India and South Korea were also on the waiver list, said a source familiar with the matter who spoke on condition of anonymity. On Saturday, India’s Oil Minister Dharmendra Pradhan told reporters in New Delhi, “In the current geopolitically challenging scenario, India has managed to convince international leaders.”
Pompeo said of the eight on the waiver list -two would eventually stop imports and the other six would greatly reduce them. But Pompeo again reiterated the administrations claim that the aim of the sanctions is to bring Iran’s export of oil to zero.
“We will ultimately move Iran to zero crude oil. That’ll take us some number of months to do that,” Pompeo told Fox News according to the transcript of the interview released by the State Department.
“We’ve been able to do that in a way that hasn’t had a huge impact on crude oil prices. That’s a good thing for American consumers.”
How much oil is Iran exporting?
Iran says it is not worried over the re-imposition of sanctions by the U.S. “America will not be able to carry out any measure against our great and brave nation … We have the knowledge and the capability to manage the country’s economic affairs,” Iran’s Foreign Ministry spokesman Bahram Qasemi told state TV.
Actually, if the truth is told, not everyone on the world stage is happy with the move by Trump. The European Union, France, Germany, and Britain are calling Trump’s move “regrettable.” The EU, along with China and Russia is creating a special mechanism that would bypass the sanctions.
With all the news on how the U.S. expects to cut Iranian crude exports down to zero, Iran is still exporting 1.7 million to 1.9 million barrels per day of crude oil and condensate, a super light form of oil, according to investment banks, tanker-tracking firms and the International Energy Agency, reports CNBC News.
As was pointed out in Digital Journal October 20, Iran’s oil exports had averaged more than 2.2m barrels a day. This figure is based on data from a group called TankerTrackers. TankerTrackers monitors oil shipments around the globe, providing needed data and satellite imagery to exporters and importing countries.
Generally, legitimate ships adhere to an international law called the International Convention for the Safety of Life at Sea, that ships must keep their transponders on at all times. but Iran is using a fleet of “ghost ships,” tankers that turn off their GPS transponders to get around the oil sanctions.
Based on these latest figures, Iran’s exports of oil have only dropped about 10 percent from the level prior to sanctions beginning. Samir Madani, one of TankerTrackers co-founders, said it has been well documented that Iran has been using ghost ships to export their oil.
