US sanc­tions hit harder than seen

Gulf Times Business - - FRONT PAGE -

Sanc­tions on Ira­nian oil ex­ports are hit­ting much harder than most peo­ple pre­dicted as the ad­min­is­tra­tion of US Pres­i­dent Don­ald Trump takes a tough line on en­force­ment, said ex­ec­u­tives from the world’s largest en­ergy traders.

Per­haps 2mn bpd of Ira­nian crude could even­tu­ally be lost to the global mar­ket, said Jeremy Weir, chief ex­ec­u­tive of­fi­cer of Trafigura Group Pte. While other traders in­clud­ing Vi­tol Group of Cos and Gun­vor Group saw the im­pact closer to 1mn, that’s still twice as much as most peo­ple ini­tially pre­dicted.

“Ira­nian ex­ports of crude oil will be much re­duced,” Vi­tol chair­man Ian Tay­lor said in a Bloomberg tele­vi­sion in­ter­view. That’s largely the cause of the se­vere “fear fac­tor” in the crude mar­ket that’s driven prices up to $85 a bar­rel, he said.

The traders speak­ing at the Oil and Money con­fer­ence in Lon­don on Wed­nes­day, which in­cluded Gun­vor CEO Tor­b­jorn Torn­qvist and Glen­core Plc’s head of oil and gas Alex Beard, weren’t universal in their pre­dic­tions for prices. Crude fu­tures at $100 or higher were pos­si­ble by year-end, said Torn­qvist, while Tay­lor saw the mar­ket drift­ing $5 or $10 lower by Jan­uary.

“We don’t have a sup­ply squeeze, there’s plenty of oil around” right now de­spite the sanc­tions, said Tay­lor. With cur­rent prices, de­mand could start to weaken, he said.

Ef­forts by the Eu­ro­pean Union to pre­serve the in­ter­na­tional nu­clear deal with Iran by set­ting up a pay­ment mech­a­nism to cir­cum­vent US sanc­tions won’t help oil buy­ers, the trad­ing-house ex­ec­u­tives said.

“I don’t see any chance that the Eu­ro­pean pay­ments mech­a­nism on Iran could work,” said Beard. When asked if there was any­thing that would tempt oil traders to skirt US sanc­tions, such as the oil mar­ket tight­en­ing sig­nif­i­cantly or Tehran of­fer­ing dis­counts, Tay­lor was em­phatic: “No, no, and no.”

A gas flare on an oil pro­duc­tion plat­form in the Soroush oil fields is seen along­side an Ira­nian flag (file). Ef­forts by the Eu­ro­pean Union to pre­serve the in­ter­na­tional nu­clear deal with Iran by set­ting up a pay­ment mech­a­nism to cir­cum­vent US sanc­tions won’t help oil buy­ers, say trad­ing-house ex­ec­u­tives.

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