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U.S. to Eliminate Iran Oil Waivers After May 2 Expiration

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  • U.S. to Eliminate Iran Oil Waivers After May 2 Expiration

The Trump administration won’t renew waivers that let countries buy Iranian oil without facing U.S. sanctions, according to four people familiar with the matter, a move that roiled energy markets and risks upsetting major importers such as China and India.

U.S. Secretary of State Michael Pompeo planned to announce the decision Monday morning in Washington, said the people, who asked not to be identified discussing a plan that hasn’t been formally unveiled. The current set of waivers — issued to China, Greece, India, Italy, Japan, South Korea, Taiwan and Turkey — expire May 2.

The administration will also announce commitments from other suppliers, including Saudi Arabia and the United Arab Emirates, that will offset the loss of Iranian crude on the market, according to two of the people.

The decision not to renew the waivers is a victory for National Security Advisor John Bolton and his allies who had argued that U.S. promises to get tough on Iran were meaningless with waivers still in place. Pompeo and his team had been more cautious, though they also maintained that the market was well-enough supplied to ramp up pressure on Iran.

“The maximum pressure campaign could not be maximalist until the administration cut off Iran’s oil exports,” said Mark Dubowitz, the chief executive officer of the Foundation for Defense of Democracies and a supporter of additional sanctions on Iran. “With this decision, Iran’s economy will be under severe pressure as its hard currency earnings dry up and its foreign exchange reserves plummet.”

Oil Rises

The price of Brent crude, the global oil benchmark, rose as much as 3.3 percent to $74.31 a barrel on Monday, the highest intraday price in almost six months.

The State Department declined to comment Sunday night. One of the people said that President Donald Trump had briefed Saudi Arabia’s Crown Prince Mohammed Bin Salman and U.A.E. Crown Prince Mohammed Bin Zayed on the decision in phone calls in the last few days. The U.S. decision was reported earlier by the Washington Post.

Japan and South Korea, two of the U.S.’s closest allies and long-time buyers of Iranian crude, said they were aware of the reports about the waivers but didn’t confirm the decision. Japan’s chief cabinet secretary, Yoshihide Suga, said Monday in Tokyo that the government had kept in close contact with the U.S. and expressed the view that “there should be no damage to the activities of Japanese companies.”

China’s foreign ministry in Beijing didn’t immediately respond to a faxed request for comment Monday. The nation is the biggest buyer of Iranian crude.

Trump withdrew from the 2015 nuclear deal between Iran and world powers almost a year ago and revived a range of sanctions against Iran and any countries doing business with the Islamic Republic. But he and his top advisers have been wary of disrupting energy markets and spurring a hike in U.S. pump prices. For that reason, they allowed waivers for Iran’s biggest buyers of crude, including China, India and Turkey.

One of the people said that some of the countries that had previously received waivers would be given a little more time to wind down purchases. The person described that not as a waiver but more as a brief grace period.

Zero Exports

Bolton and officials in the Energy Department have argued that it’s time for the administration to make good on its desire to push Iran’s oil exports to zero. While Pompeo’s team, led by Iran special representative Brian Hook, cautioned that a sudden removal of Iranian crude from the market — about 1.1 million barrels a day — could fuel volatility and lead to a price spike.

“We certainly aren’t looking to grant any exceptions or waivers,” Hook said in an interview this month with Kevin Cirilli on Bloomberg Radio’s “Sound On.” Oil markets are better supplied this year than last, and that “puts us in a better position to accelerate the path to zero,” he said.

The administration had also faced growing pressure from Iran hawks in the Senate, including Ted Cruz of Texas and Tom Cotton of Arkansas, to cut waivers to zero. Some senators had threatened to hold up administration nominees if the waivers stayed in place and argued that continuing to grant exemptions would be a direct contradiction of the Trump administration’s decision to leave the Iran deal.

The risk now is the decision could spike crude prices just as Trump begins to gear up to campaign for a second term. His administration had been wary of doing anything that could push crude prices above $70 a barrel.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Crude Oil

Oil Prices Drop on Stronger U.S Dollar

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The strong U.S Dollar pressured global crude oil prices on Thursday despite the big drop in U.S crude oil inventories.

The Brent crude oil, against which Nigerian oil is priced, dropped by 74 cents or 1 percent to settle at $73.65 a barrel at 4.03 am Nigerian time on Thursday.

The U.S West Texas Intermediate crude oil depreciated by 69 cents or 1 percent to $71.46 a barrel after reaching its highest since October 2018 on Wednesday.

Energy markets became so fixated over a robust summer travel season and Iran nuclear deal talks that they somewhat got blindsided by the Fed’s hawkish surprise,” said Edward Moya, senior market analyst at OANDA.

The Fed was expected to be on hold and punt this meeting, but they sent a clear message they are ready to start talking about tapering and that means the dollar is ripe for a rebound which should be a headwind for all commodities.

The U.S. dollar boasted its strongest single day gain in 15 months after the Federal Reserve signaled it might raise interest rates at a much faster pace than assumed.

A firmer greenback makes oil priced in dollars more expensive in other currencies, potentially weighing on demand.

Still, oil price losses were limited as data from the Energy Information Administration showed that U.S. crude oil stockpiles dropped sharply last week as refineries boosted operations to their highest since January 2020, signaling continued improvement in demand.

Also boosting prices, refinery throughput in China, the world’s second largest oil consumer, rose 4.4% in May from the same month a year ago to a record high.

This pullback in oil prices should be temporary as the fundamentals on both the supply and demand side should easily be able to compensate for a rebounding dollar,” Moya said.

 

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Crude Oil

Oil Rises as Threat of Immediate Iran Supply Recedes

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Oil prices rose on Tuesday, with Brent gaining for a fourth consecutive session, as the prospect of extra supply coming to the market soon from Iran faded with talks dragging on over the United States rejoining a nuclear agreement with Tehran.

Brent crude was up by 82 cents, or 1.13%, to $73.68 per barrel, having risen 0.2% on Monday. U.S. oil gained 91 cents, or 1.3%, to $71.79 a barrel, having slipped 3 cents in the previous session.

Indirect discussions between the United States and Iran, along with other parties to the 2015 deal on Tehran’s nuclear program, resumed on Saturday in Vienna and were described as “intense” by the European Union.

A U.S. return to the deal would pave the way for the lifting of sanctions on Iran that would allow the OPEC member to resume exports of crude.

It is “looking increasingly unlikely that we will see the U.S. rejoin the Iranian nuclear deal before the Iranian Presidential Elections later this week,” ING Economics said in a note.

Other members of the Organization of Petroleum Exporting Countries (OPEC) along with major producers including Russia — a group known as OPEC+ — have been withholding output to support prices amid the pandemic.

“Additional supply from OPEC+ will be needed over the second half of this year, with demand expected to continue its recovery,” ING said.

To meet rising demand, U.S. drillers are also increasing output.

U.S. crude production from seven major shale formations is forecast to rise by about 38,000 barrels per day (bpd) in July to around 7.8 million bpd, the highest since November, the U.S. Energy Information Administration said in its monthly outlook.

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Crude Oil

Oil Prices Rise as Demand Improves, Supplies Tighten

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Oil Prices - Investors King

Oil prices rose on Monday, hitting their highest levels in more than two years supported by economic recovery and the prospect of fuel demand growth as vaccination campaigns in developed countries accelerate.

Brent was up 53 cents, or 0.7%, at $73.22 a barrel by 1050 GMT, its highest since May 2019.

U.S. West Texas Intermediate gained 44 cents, or 0.6%, to $71.35 a barrel, its highest since October 2018.

“The two leading crude markers are trading at (almost) two-and-a-half-year highs amid a potent bullish cocktail of demand optimism and OPEC+ supply cuts,” said Stephen Brennock of oil broker PVM.

“This backdrop of strengthening oil fundamentals have helped underpin heightened levels of trading activity.”

Motor vehicle traffic is returning to pre-pandemic levels in North America and much of Europe, and more planes are in the air as anti-coronavirus lockdowns and other restrictions are being eased, driving three weeks of increases for the oil benchmarks.

The mood was also buoyed by the G7 summit where the world’s wealthiest Western countries sought to project an image of cooperation on key issues such as recovery from the COVID-19 pandemic and the donation of 1 billion vaccine doses to poor nations.

“If the inoculation of the global population accelerates further, that could mean an even faster return of the demand that is still missing to meet pre-Covid levels,” said Rystad Energy analyst Louise Dickson.

The International Energy Agency (IEA) said on Friday that it expected global demand to return to pre-pandemic levels at the end of 2022, more quickly than previously anticipated.

IEA urged the Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, to increase output to meet the rising demand.

The OPEC+ group has been restraining production to support prices after the pandemic wiped out demand in 2020, maintaining strong compliance with agreed targets in May.

On the supply side, heavy maintenance seasons in Canada and the North Sea also helped prices stay high, Dickson said.

U.S. oil rigs in operation rose by six to 365, the highest since April 2020, energy services company Baker Hughes Co said in its weekly report.

It was the biggest weekly increase of oil rigs in a month, as drilling companies sought to benefit from rising demand.

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