Oil seesaws on reported Iran sanction waivers, US-China trade hopes

Oil seesaws on reported Iran sanction waivers, US-China trade hopes

The US has insisted all along that it wanted every country to reduce oil imports from Iran to zero eventually, but was open to country-specific waivers that would allow limited imports by those pledging "significant" cut.

State-run Indian refiner Hindustan Petroleum said it may resume buying Iranian oil if India secures a waiver from USA sanctions, its chairman MK Surana said on Thursday (November 1).

A list of all countries getting waivers is expected to be released officially on Monday, several briefed industry sources said.

But the Obama White House later lifted the sanctions when it agreed to Iran's 2015 nuclear deal, which granted sanctions relief in exchange for curbs on Iran's nuclear activities.

But the move has backfired on U.S. President Donald Trump as it led to a steep rally in oil prices, including the cost of gasoline, ahead of U.S. mid-term elections. In its plan for the 2018-19 fiscal year, set before the United States announced its JCPOA withdrawal, India was to import 25 million metric tons of Iranian oil, or about 490,000 bpd.

Already, through its pressure campaign, the USA has managed to reduce Iran's oil exports from 2.7 million to 1.6 million barrels a month, according to internal US estimates.

Oil extended losses near $65 a barrel after the worst month in more than two years on lingering concern over a supply glut and a stronger dollar. "I don't know whether these waivers are permanent or temporary ones", IRIB quoted Iran's Deputy Oil Minister Ali Kardor as saying. In October, WTI crude oil settled 10.9 percent lower, while Brent finished 8.8 percent lower for the month.

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The administration must maintain a delicate balancing act with the waivers: ensuring the oil market has sufficient supply and avoiding a politically damaging spike in fuel prices, while also ensuring that Iran's government doesn't collect enough revenue that the USA sanctions become irrelevant.

"We think Trump will agree to China importing some volumes, similar to the treatment that India and South Korea receive", Clayton Allen of Height Securities said in a note on Friday.

Through April, South Korea had imported an average of 300,000 bpd of Iranian oil, but in the months since Trump's decision, it tapered those purchases in anticipation of the sanctions.

The other four countries to get waivers remained to be identified, but Turkey was predicted to be one of them.

Iran said it does not fear the impending US sanctions that are set to go into effect next week.

"The U.S. may use waivers to slow-walk implementation, but these will not apply indefinitely", Allen said.

- Financial transactions. Starting on Monday, any foreign institution that does business with Iran's central bank or other banks in the country will lose access to the United States financial system.

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