U.S. prepares to end Iran oil waivers; Asian buyers to
be hardest hit
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[April 22, 2019]
By Susan Cornwell and Henning Gloystein
WASHINGTON/SINGAPORE (Reuters) - The United
States is expected to announce on Monday that buyers of Iranian oil need
to end imports soon or face sanctions, a source familiar with the
situation told Reuters, triggering a 3 percent jump in crude prices to
their highest for 2019 so far.
Officials in Asia opposed the expected move, pointing to tight market
conditions and high fuel prices that were harming industry.
The source confirmed a report by the Washington Post that the
administration will terminate the sanctions waivers it granted to some
importers of Iranian oil late last year.
Benchmark Brent crude oil futures rose by as much as 3.2 percent to
$74.31 a barrel, the highest since Nov. 1, in early trading on Monday in
reaction to expectations of tightening supply. U.S. West Texas
Intermediate (WTI) futures climbed as much as 3 percent to $65.87 a
barrel, its highest since Oct. 30.
U.S. President Donald Trump wants to end the waivers to exert "maximum
economic pressure" on Iran by cutting off its oil exports and reducing
its main revenue source to zero.
Saudi Arabia, the world's top oil exporter, was willing to compensate
the potential supply loss, but it would first need to assess the impact
before boosting its own production, a source familiar with Saudi
thinking told Reuters.
In November, the U.S. reimposed sanctions on exports of Iranian oil
after President Trump unilaterally pulled out of a 2015 nuclear accord
between Iran and six world powers.
Washington, however, granted waivers to Iran's eight main buyers -
China, India, Japan, South Korea, Taiwan, Turkey, Italy and Greece -
that allowed them limited purchases for six months.
On Monday, Secretary of State Mike Pompeo will announce "that, as of May
2, the State Department will no longer grant sanctions waivers to any
country that is currently importing Iranian crude or condensate," the
Post's columnist Josh Rogin said in his report, citing two State
Department officials that he did not name.
Oil markets have tightened this year because of supply cuts led by the
Organization of the Petroleum Exporting Countries (OPEC).
As a result, Brent prices have risen by more than a third since January,
and WTI by more than 40 percent.
Analysts said they expected the Trump administration to push OPEC and
its de-facto leader Saudi Arabia to stop withholding supply to calm
market fears of oil shortages.
Trump spoke with Saudi Arabia's Crown Prince Mohammed bin Salman by
phone last week, and discussed ways of "maintaining maximum pressure
The source familiar with Saudi thinking said any action by OPEC's
biggest producer depends on the certainty of scrapping the waivers and
its effect on the oil market. Saudi Arabia has about 2 million barrels
of oil per day of spare capacity.
Riyadh raised its oil output last year after the Trump administration
pledged to bring Iranian crude exports to zero, only to grant waivers
later triggering a decline in prices and build-up in oil inventories.
"The Saudis don't want to make the same mistake again," one OPEC source
Iraq, OPEC's second largest producer, is committed to the global supply
cuts taken by OPEC and its allies and any decision to raise production
must be taken collectively, an Iraq oil ministry spokesman said on
[to top of second column]
Gas flares from an oil
production platform at the Soroush oil fields in the Persian Gulf,
south of the capital Tehran, July 25, 2005. REUTERS/Raheb Homavandi/File
Iraq is among major producers from OPEC and non-OPEC who are meeting next month
in Jeddah, Saudi Arabia, as part of a panel committee to discuss the oil market
and make output recommendations, the spokesman said.
ASIA HIT HARDEST
An end to the exemptions would hit Asian buyers hardest. Iran's biggest oil
customers are China and India, who have both been lobbying for extensions to
Geng Shuang, a Chinese foreign ministry spokesman, said at a daily news briefing
in Beijing on Monday that it opposed unilateral U.S. sanctions against Iran and
that China's bilateral cooperation with Iran was in accordance with the law.
He did not say whether China would heed the U.S. call to cut Iran oil imports to
In India, refiners have started a search for alternative supplies.
The government, however, declined to comment officially.
"We are engaged with the U.S. administration on this matter and once the U.S.
side makes a comment on this matter, then we will come up with a comment," said
a source at India's foreign affairs ministry who declined to be named.
"I expect India to fall in line with the sanctions," said Sukrit Vijayakar,
director of Indian energy consultancy Trifecta.
South Korea, a close U.S. ally, is a major buyer of Iranian condensate, an
ultra-light form of crude oil that its refining industry relies on to produce
Government officials there declined to comment, but Kim Jae-kyung of the Korean
Energy Economics Institute said the end of the sanction waivers "will be a
problem if South Korea can't bring in cheap Iranian condensate (for) South
Korean petrochemical makers."
Japan is another close U.S. ally in Asia that is also a traditionally
significant buyer of Iranian oil.
The government also declined to comment ahead of an official U.S. announcement,
but Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National
Corporation (JOGMEC), said the end of the sanction waivers "is not a good policy
Prior to the re-imposition of sanctions, Iran was the fourth-largest producer
among OPEC at almost 3 million bpd, but April exports have shrunk to well below
1 million bpd, according to ship tracking and analyst data in Refinitiv.
(Reporting by Susan Cornwell in WASHINGTON and Henning Gloystein in SINGAPORE
and Rania El Gamal in DUBAI; Additional reporting by Aaron Sheldrick and Yuka
Obayahi in TOKYO, and Jane Chung in SEOUL, Meng Meng in SHANGHAI, Nidhi Verma in
NEW DELHI, Koustav Samanta and Chen Aizhu in SINGAPORE; Editing by Tom Hogue and
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