Iran’s
Oil Exports Dropping Faster Than Expected Before U.S. Sanctions
Shipments
are set to decline by a third as shippers pull back from the Islamic Republic
months ahead of a Nov. 4 U.S. deadline
An oil tanker prepared to transport crude
oil from Bandar Abbas, Iran, in March, before the Trump administration pulled
out of the Iranian nuclear accord. PHOTO: ALI MOHAMMADI/BLOOMBERG
NEWS
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By
Benoit Faucon
Aug. 28, 2018 3:05 p.m. ET
Iran oil shipments are declining at a
faster-than-expected pace ahead of U.S. sanctions set to begin in November.
Iran expects crude exports to fall by a
third in September, according to people familiar with purchasing plans,
potentially posing an unforeseen supply risk to markets. Officials at the
state-run National Iranian Oil Co. provisionally expect crude shipments to drop
to about 1.5 million barrels a day next month, down from about 2.3 million
barrels a day in June, say people familiar with the country’s ports loading
program.
Many experts had expected oil shipments to
decline by about 1 million barrels by year's end. Now some of them say that
fall may have already happened. Iran hasn’t yet announced its exports this
month or its forecast for next month.
The developments reflect in part a
reluctance of tanker companies to ship Iranian oil.
Oil companies have until Nov. 4
to adjust to a U.S. ban on buying Iranian oil following President
Trump’s decision in May to pull out of the nuclear agreement with
Tehran. The Europe Union, China and other countries have vowed to resist the
unilateral U.S. sanctions and are trying to find ways to keep buying crude from
Iran. But they have struggled to find banks, shipping companies and
insurers that are willing to risk running afoul of the U.S.
The managing director of Iran’s state oil
company, Ali Kardor, didn’t return a request for comment. A spokeswoman for
Iran’s oil ministry said she had no information about upcoming Iran oil
exports.
Countries such as India, Japan and European
Union members complied with a previous round of U.S. sanctions on Iran in
2012. What has changed since that time is that the Trump administration,
unlike the prior U.S. administration, isn’t pushing for import reductions but a
complete halt, said Sara Vakhshouri, president of Washington-based oil
consultancy SVB Energy International.
Sinking
Shipments
U.S. sanctions are seen taking a toll
onTehran's oil exports in the coming months.
Source: SVB Energy International
Note: Data for September through November
are projections. October figure is the midpoint of an estimated range of
between 1 million and 1.4 million barrels a day.
Ms. Vakhshouri, a former National Iranian
Oil Co. market analyst, said she expects Iran’s crude exports to drop by half
to 800,000 barrels a day in November compared to August. The country’s
shipments remained above 1 million barrels a day at the beginning of the last
round of sanctions.
While oil prices rose following Mr.
Trump’s decision to bring back sanctions in May, some analysts say traders have
yet to realize the scale of upcoming Iranian disruptions.
“I am not sure this drop is really got
priced in,” said Helima Croft, the chief commodities strategist at Canadian
broker RBC. “Many markets participants still seem to believe that the decline
will be smaller because President Trump would not dare risk overt tightening
the market” before the mid-terms U.S. elections.
So far, Iranian oil exports to Europe and
India have halved in recent months and, in August, fell by 25% in China, said
Reid I’Anson, economic analyst at Paris-based shipping-data tracker Kpler.
Turkey, which is embroiled in a
separate dispute with the U.S., shows how even a U.S. adversary which disagrees
with the Trump administration’s policy on Iran is impacted.
Just after Mr. Trump’s May announcement,
Iran’s exports to the European country fell from 227,000 barrels a day that
month to 70,000 barrels a day in June, with the loss offset by Iraqi and
Russian crude, according to Ankara’s Energy Market Regulatory Body.
Turkey’s main Iran oil
importer TuprasTurkiye Petrol Rafinerileri AS exemplifies its
vulnerability to sanctions the country rejects. The country’s largest refiner
banks with a joint-venture part owned by UniCredit SpA, which is
under investigation by the U.S. Department of Justice for possible sanctions
violations related to the Islamic Republic, according to disclosures from both
companies.
UniCredit and Tupras didn’t return
requests for comment.
Shipping is emerging as Iran’s main
Achille’s Heel. Starting Nov. 4, the Trump administration’s sanctions will also
ban insurance coverage for Iran oil tankers. Shippers from China, India, Greece
or Spain that transported Iranian oil as recently as July have stopped dealing
with Tehran, according to tracker FleetMon and some of the shippers. Many of
the shippers are insured with European firms that think dealing with Iran is
not worth the risk of falling afoul of the U.S., said Mike Salthouse, chairman
of the Sanctions subcommittee at the International Group of Protection &
Indemnity Clubs.
The P&I Clubs’ reinsurers cover around
90% of the world’s shipping tonnage, including oil tankers. Mr. Salthouse said
“if we provide insurance in breach U.S. sanctions, that would deny us access to
U.S. financial system, that would put us out of business overnight.”
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