U.S. to end all waivers on imports of Iranian oil, crude price jumps

By Lesley Wroughton and Humeyra Pamuk WASHINGTON (Reuters) - The United States on Monday demanded that all buyers of Iranian oil stop purchases effective May 1 or face sanctions, a move to choke off Tehran's oil revenues which sent crude prices to six-month highs on fears of a potential supply crunch. The Trump administration's move on Monday not to renew exemptions granted last year to major buyers of Iranian oil was a more stringent outcome than some nations had expected. Several importers had hoped to continue buying Iranian oil without facing U.S.

Reuters April 23, 2019 01:05:45 IST
U.S. to end all waivers on imports of Iranian oil, crude price jumps

US to end all waivers on imports of Iranian oil crude price jumps

By Lesley Wroughton and Humeyra Pamuk

WASHINGTON (Reuters) - The United States on Monday demanded that all buyers of Iranian oil stop purchases effective May 1 or face sanctions, a move to choke off Tehran's oil revenues which sent crude prices to six-month highs on fears of a potential supply crunch.

The Trump administration's move on Monday not to renew exemptions granted last year to major buyers of Iranian oil was a more stringent outcome than some nations had expected. Several importers had hoped to continue buying Iranian oil without facing U.S. sanctions, according to sources familiar with discussions between the United States and other nations as late as last week.

The United States reimposed sanctions in November on exports of Iranian oil after U.S. President Donald Trump last spring unilaterally pulled out of a 2015 accord between Iran and six world powers to curb Tehran's nuclear programme. Eight economies, including China and India, were granted waivers for six months, and several had expected those exemptions to be renewed.

Tehran remained defiant, saying it was prepared for the end of waivers, while the Revolutionary Guards repeated a threat to close the Strait of Hormuz, a major oil shipment channel in the Gulf, Iranian media reported.

The White House said it was working with top oil exporters Saudi Arabia and the United Arab Emirates to ensure the market was "adequately supplied." Traders, already fretting about tight supplies, raised scepticism about whether this more stringent approach, along with ongoing sanctions on Venezuela's oil industry, could backfire in the form of a major spike in prices.

“It is a surprise that the requirement to cease importing Iranian oil should come at this next May deadline," said Elizabeth Rosenberg, director of the energy, economics and security programme at Washington-based Centre for a New American Security. "Having only several weeks’ notice before the deadline means there are lots of cargoes booked for May delivery. This means that it will now be harder to get it out by the deadline."

Iran's oil exports have dropped to about 1 million barrels per day (bpd) from more than 2.5 million bpd prior to the re-imposition of sanctions. U.S. Secretary of State Mike Pompeo, in a briefing Monday, said "we're going to zero across the board," saying the United States had no plans for a grace period beyond May 1 for countries to comply.

The White House intends to deprive Iran of its lifeline of $50 billion in annual oil revenues, Pompeo said, as it pressures Tehran to curtail its nuclear programme, ballistic missile tests and support for conflicts in Syria and Yemen.

A senior administration official said President Donald Trump was confident that Saudi Arabia and the United Arab Emirates will fulfil their pledges to compensate for the shortfall from Iranian oil exports. U.S. Assistant Secretary of State for Energy Resources Frank Fannon said the kingdom was taking "active steps" to ensure global oil markets were well supplied.

Saudi Arabian Energy Minister Khalid al-Falih, in a statement on Monday, did not commit to raising production, saying it was "monitoring the oil market developments" after the U.S. statement, and that it would coordinate with other oil producers to ensure a balanced market. OPEC is next scheduled to meet in June.

While Saudi Arabia is expected to boost output again, analysts fear the U.S. move - along with sanctions on Venezuela - will leave the world with inadequate spare capacity.

The international Brent crude oil benchmark rose to more than $74 a barrel on Monday, the highest since November, due to the uncertainty surrounding increased supply from Saudi Arabia and other OPEC nations, while U.S. prices hit a peak of $65.92 a barrel, the highest since October 2018.

“Despite high and fast-rising oil prices and high geopolitical disruption risk, (Trump) is betting the farm that Saudi Arabia and the UAE will contain upward price pressure by more than offsetting Iranian oil," said Robert McNally, president of Rapidan Energy Group, an energy consultancy.

In addition to China and India, the economies of Japan, South Korea, Taiwan, Turkey, Italy and Greece had also been granted waivers.

QUESTIONS ABOUT WORLD SUPPLY

Trump has been clear to his national security team in recent weeks that he wants the waivers to end and national security adviser John Bolton has been working on that within the administration.

"One thing that has clearly been going on inside the administration is a debate about when they should get to zero," said Rosenberg.

In recent months, Saudi Arabia and other OPEC members have cut supply dramatically. OPEC, along with ally Russia and others, agreed to reduce output by 1.2 million bpd, but they have exceeded those benchmarks, with Saudi Arabia alone reducing supply by 800,000 bpd.

While Italy, Greece and Taiwan already have halted purchases, doing so could prove much more challenging for China and India. Turkey, another buyer, already has slammed the U.S. decision, saying it will not serve peace.

"We had indicated privately that zero was coming and now we're here," a senior administration official said on Monday, referencing Turkey's concerns.

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.

South Korea’s Yonhap news agency quoted the Foreign Ministry as saying the South Korean government had been negotiating with the United States at all levels to extend the waivers and that it would continue to make every effort to reflect Seoul's position until the May deadline.

In India, refiners have started a search for alternative supplies but the government declined to comment officially.

Embassies of India, China and South Korea in Washington did not immediately respond to requests for comment, along with Japan, whose Prime Minister Shinzo Abe will be in the U.S. capital on Friday for an official visit.

(Additional reporting by Jessica Resnick Ault, Makini Brice, Doina Chiacu, David Brunnstrom, Steve Holland, Jane Chung and Aaron Sheldrick; Writing by Humeyra Pamuk; Editing by David Gaffen, Bill Trott and James Dalgleish)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

Apple will enable storage of IDs like drivers licenses on iPhones
Business

Apple will enable storage of IDs like drivers licenses on iPhones

By Stephen Nellis (Reuters) -Apple Inc on Monday said it will offer the ability to store state-issued identification cards digitally on iPhones and that it is working with the U.S. Transportation Security Administration to accept the digital IDs at airports, one of several updates to the software that runs on its devices. It also showed updates to its FaceTime video chat app, adding the ability to schedule calls with multiple attendees and making the software compatible with Android and Windows devices.

Airline bosses call on UK and U.S. to lift trans-Atlantic travel restrictions
Business

Airline bosses call on UK and U.S. to lift trans-Atlantic travel restrictions

LONDON (Reuters) - The bosses of all airlines flying passenger services between Britain and the United States called on Monday for the countries' governments to relax COVID-19 restrictions to reopen travel routes between the two countries. After more than a year of restrictions, the CEOs of American Airlines, IAG unit British Airways, Delta Air Lines, United Airlines and JetBlue Airways Corp said high vaccination rates in both countries meant travel could restart safely. The push for reopening trans-Atlantic routes on Monday comes ahead of meetings between U.S.

EU patience wearing thin with UK on N.Ireland, weighing options
Business

EU patience wearing thin with UK on N.Ireland, weighing options

BRUSSELS (Reuters) - The European Union's patience towards Britain over Brexit arrangements in Northern Ireland is wearing thin and the bloc will consider its options should Britain continue its "confrontational path", an EU official said on Monday.