As Trump pulls out of Iran deal, Asia grapples with impact on oil supplies
SINGAPORE/ NEW YORK/ TOKYO: Asia’s petroleum refiners are seeking alternative supplies as they prepare for renewed US sanctions against major oil exporters amid a tight market.
Iran is the third-largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC), which had recently ordered production cuts despite strong demand.
The United States plans to impose new unilateral sanctions after abandoning the agreement, which limited Iran’s nuclear ambitions in exchange for removing joint US-Europe sanctions.
New sanctions will likely include measures against Iran’s oil and shipping sectors, said Ehsan Khoman, head of research for Middle East and North Africa at Mitsubishi UFJ Financial Group, with 180 days for those industries to adjust.
“By declaring...the US will be instituting the highest level of sanctions against Iran – adding that any country that aids Iran will also be sanctioned – President Trump is clearly articulating that he has minimal desire in an alternative agreement with Iran,” Khoman said.
During the last round of sanctions, Iran’s oil supplies fell by around 1 million barrels per day ( bpd), but the country re- emerged as a major oil exporter after sanctions were lifted in January 2016.
Since then, Iran ramped up its production and oil exports.
It produced 3.81 million bpd in March 2018, almost 4 per cent of global output, and its crude oil exports averaged over 2 million bpd in January- March quarter this year.
Analysts now expect Iran’s supplies to fall by 300,000 bpd to 1 million bpd, depending on how many other countries fall in line with Washington.
“Iran’s exports of oil to Asia and Europe will almost certainly decline later this year and into 2019 as some nations seek alternatives in order to avoid trouble with Washington and as sanctions start to bite,” said Sukrit Vijayakar, director of energy consultancy Trifecta.
Most US allies disagree with Trump’s decision to abandon the deal.
“President Trump’s decision to withdraw the US from the Iran nuclear deal... formally sets US Iran policy on a markedly different course to its European allies, who see the JCPOA as the best way to prevent Iran from developing a nuclear weapons programme,” said Peter Kiernan, lead energy analyst at The Economist Intelligence Unit ( EIU). — Reuters