Gold Silver Reports (GSR) – US will be Tough on Iran Sanctions, And that Could Sting Consumers — A senior State Department official Tuesday said the U.S. is seeking a reduction in Iranian exports to zero and does not intend to grant any waivers for companies or countries seeking exemptions. President Donald Trump pulled the U.S. out of the Iran nuclear deal, which continues to be supported by Iran and the other parties to it: the U.K., Germany, Russia, China, Italy and France.
Even with the addition of barrels promised by OPEC and other producers last weekend, the world market is down hundreds of thousands of barrels because of Venezuela’s production issues and a surprise outage in Canada, which took 360,000 barrels off the market last week.
There was also the sudden loss of 450,000 barrels a day in Libya, a still unclear situation. The leader of Libya’s eastern political faction has transferred control of ports to a parallel national oil company aligned with his faction. The existing national oil company does not recognize that new company.
“If that is the position the administration chooses to pursue, it could create a very tight oil market and cause even another revisiting of the OPEC and Vienna alliance supply management decision,” said Carlos Pascual, IHS Markit senior vice president and former State Department energy envoy during the first round of sanctions on Iran.
Oil prices shot higher on Tuesday after the State Department’s comment, with Brent up about 2 percent to more than $76 per barrel and West Texas Intermediate up 3.5 percent at $70.46 per barrel. Many analysts have expected the U.S. to be able to halt about 500,000 barrels a day of Iranian exports, but some said Tuesday with the strident tone of the Trump administration and lack of waivers, that number could now be higher.
“We already raised our number to 700,000 for Q4,” said Helima Croft, head of global commodities research at RBC. “Could that number now top a million? Yes. Certainly I think the losses will pass the million mark in Q1 2019 if the State Department sticks to this strategy. Europe, South Korea and Japan will comply. India will likely at least partially comply. China is the wild card.“
Iran exports about 2.4 million barrels a day, and the U.S. and other nations succeeded in keeping about half that amount from the market the last time Iran was sanctioned. But this time the U.S. is acting alone, as the six other countries remain committed to the deal to curb Iran’s nuclear program in exchange for an end to financial sanctions.
Trump has complained the Iran deal was one-sided and would not be in place long enough, meaning Iran could return to its nuclear program at some point. – Neal Bhai Reports (NBR)
