BMI expects Iran’s Asian crude buyers to cut back ‘substantially’
Asian buyers of Iranian crude are likely to reduce their offtake substantially over the coming quarters on the expectation of a re-imposition of US sanctions and uncertainty over the provision of waivers from Washington, research firm BMI said in a note.
Oil exporters in the Middle East such as Saudi Arabia, Iraq, the UAE and Kuwait are likely to grab Iran’s market share in Asia ahead of the anticipated reduction, the note read.
Iran is one of the big suppliers of crude to Asia, with China, India, Japan and South Korea importing more than half of its total exports of 2.7 million barrels per day. China, which is embroiled in a trade war with the US, is likely to continue to procure Iranian crude.
Iran has ramped up its exports to pre-sanctions levels over the past couple of years following the lifting of sanctions in 2016 after a deal was struck with Europe, the US, China and Russia the previous year. But the resurgent Iranian oil industry will take a hit after President Donald Trump’s government exited the nuclear deal in May.
Following the exit, the US administration has given an ultimatum to Iran’s crude buyers to cut back their supplies before November 4. While it was understood that some customers may seek waivers from the US to continue investments in Iran or buy crude, Washington has been opaque on the procedure to seek exemptions.
Imports of Iranian crude have already declined in Asia to 220,000 bpd over the first half of the year, a decrease of about 22 per cent year-on-year, noted BMI. Iran accounts for 8 per cent of crude supply in Asia, which relies on about 57 countries to meet its growing fuel requirements.
Iran, which supplies largely medium to heavy crude grades has been on the receiving end of cutbacks from refiners in South Korea. They suspended their July loadings of crude and condensate following government pressure over shipping insurance issues and lack of clarity over waivers.
Japan, as well as Taiwanese refiner Formosa Petrochemical Corporation, are expected to follow suit.
Meanwhile, exports to the main Asian buyers from Saudi Arabia, Iraq, the UAE and Kuwait rose 2 per cent year-onyear over May and June.
China and India, which continued to import Iranian crude during the earlier sanctions on Iran, increased imports on a year-on-year basis during the same period. However, the latter is likely to succumb to US pressure and slow imports.