Gas flares from an oil production platform at the Soroush oil fields in the Persian Gulf, south of the capital Tehran. - Reuters
The United States is expected to announce on Monday that buyers of Iranian oil need to end imports soon or face sanctions, a source familiar with the situation told Reuters, triggering a 3 percent jump in crude prices to their highest for 2019 so far. Officials in Asia opposed the expected move, pointing to tight market conditions and high fuel prices that were harming industry.
The source confirmed a report by the Washington Post that the administration will terminate the sanctions waivers it granted to some importers of Iranian oil late last year.Benchmark Brent crude oil futures rose by as much as 3.2 percent to $74.31 a barrel, the highest since Nov. 1, in early trading on Monday in reaction to expectations of tightening supply. US West Texas Intermediate (WTI) futures climbed as much as 3 percent to $65.87 a barrel, its highest since Oct. 30.
US President Donald Trump wants to end the waivers to exert "maximum economic pressure" on Iran by cutting off its oil exports and reducing its main revenue source to zero. Saudi Arabia, the world's top oil exporter, was willing to compensate the potential supply loss, but it would first need to assess the impact before boosting its own production, a source familiar with Saudi thinking told Reuters.
In November, the US reimposed sanctions on exports of Iranian oil after President Trump unilaterally pulled out of a 2015 nuclear accord between Iran and six world powers.Washington, however, granted waivers to Iran's eight main buyers - China, India, Japan, South Korea, Taiwan, Turkey, Italy and Greece - that allowed them limited purchases for six months.
On Monday, Secretary of State Mike Pompeo will announce "that, as of May 2, the State Department will no longer grant sanctions waivers to any country that is currently importing Iranian crude or condensate," the Post's columnist Josh Rogin said in his report, citing two State Department officials that he did not name.
Oil markets have tightened this year because of supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC).As a result, Brent prices have risen by more than a third since January, and WTI by more than 40 percent.
Analysts said they expected the Trump administration to push OPEC and its de-facto leader Saudi Arabia to stop withholding supply to calm market fears of oil shortages.Trump spoke with Saudi Arabia's Crown Prince Mohammed bin Salman by phone last week, and discussed ways of "maintaining maximum pressure against Iran."
The source familiar with Saudi thinking said any action by OPEC's biggest producer depends on the certainty of scrapping the waivers and its effect on the oil market. Saudi Arabia has about 2 million barrels of oil per day of spare capacity.
Riyadh raised its oil output last year after the Trump administration pledged to bring Iranian crude exports to zero, only to grant waivers later triggering a decline in prices and build-up in oil inventories."The Saudis don't want to make the same mistake again," one OPEC source said.
Iraq, OPEC's second largest producer, is committed to the global supply cuts taken by OPEC and its allies and any decision to raise production must be taken collectively, an Iraq oil ministry spokesman said on Monday.Iraq is among major producers from OPEC and non-OPEC who are meeting next month in Jeddah, Saudi Arabia, as part of a panel committee to discuss the oil market and make output recommendations, the spokesman said.
---Reuters, Washington
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