Oil seems to shrug off U.S. sanctions on Iran

Crude price slides as supply worries dwindle

WASHINGTON — The Trump administration on Monday imposed sanctions on Iranian oil exports, and the question facing oil analysts is: How much crude will the sanctions take off global markets?

So far, the answer appears not much — or at least not as much as thought earlier this fall, when traders bid up U.S. crude above $76 a barrel on concerns of potential shortages once the sanctions kicked in. The Trump administration has granted six-month waivers from the sanctions to some of the world’s biggest energy consumers, including China, India, Japan and South Korea.

Crude continued its recent slide Tuesday, moving closer to bear market territory, as supply worries dwindled. Oil lost 89 cents a barrel, or more than 1 percent, in New York to settle at $62.21. Oil is down more than 18 percent from its recent peak of $76.41 a barrel on Oct.3; bear markets are generally defined as declines of 20 percent or more.

“The administration did what it said it was going to do, but the big question is, how will administration proceed from here?” David Mortlock, an attorney at Willkie Farr & Gallagher, said Monday

at an event hosted by the Washington think tank Atlantic Council. “We will see how this plays out over the next few months.”

Iranian production has shrunk by more than 1 million barrels a day since June, after the Trump administration announced it was pulling out of the Iran nuclear deal and reimposing sanctions. But Iran is still producing close to 1.5 million barrels a day, according to a report last week by the Center for Strategic and International Studies.

“Uncertainty still exists” about how much of that oil comes off the market, the report said, with the Trump administration yet to clarify how quickly the sanctions are being rolled out and what actions it will take against countries that still buy Iranian crude.

At the same time, data out of Iran indicate that more oil is leaving the country than the Iranian government’s official reports would indicate, said Holly Dagres, senior fellow at the Atlantic Council.

Reports that Iranian tankers are turning off tracking devices to avoid detection have surfaced, she added. At the same time, Iran is likely selling crude covertly to other countries to be blended into their exports.

“Iran’s official (oil export) numbers are much lower than the unofficial numbers,” Dagres said.