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Oil prices surge after U.S. orders companies to end Iranian imports by Nov. 4

posted onJune 26, 2018

Companies that buy Iranian crude oil must completely halt purchases of the commodity from Iran by November,  or else they will face powerful U.S. sanctions, a senior U.S. State Department official told reporters on Tuesday. 

Last month, U.S. President Donald Trump pulled America out of the landmark Iran nuclear deal, reinstating financial sanctions on the Islamic Republic. Under the Joint Comprehensive Plan of Action (JCPOA) signed in 2015 in Vienna with the US, China, Russia, Germany, France and Britain, Iran-the world's fifth-biggest oil producer-committed to a peaceful nuclear energy programme. In exchange, international sanctions were lifted, allowing it to sell its oil and gas worldwide.  

“Yes, we are asking them to go to zero,” Reuters quoted the senior official as saying when asked if the United States was pressing allies to halt Iranian oil imports to zero by November.

“We’re going to isolate streams of Iranian funding and looking to highlight the totality of Iran’s malign behaviour across the region,” the official, speaking on condition of anonymity, added.

Asked if any waivers were expected to be granted to companies that purchase Iranian oil or invest in its energy industry, the official said the position of the administration was that no exemptions would be permitted. He added: “I would be hesitant to say zero waivers ever.” 

The senior official also said a U.S. delegation was headed to the Middle East next week to urge Gulf producers to ensure global oil supplies as Iran is cut out of the market starting on Nov. 4 , as the date marks 180 days since the US announced it is pulling out from the Iran nuclear deal.

Officials have discussed the matter with European countries but have yet to hold talks with China and India, among the largest importers of Iran’s oil, as well as Turkey and Iraq, the  person in question added.

The Wall Street Journal reported buyers of Iranian crude had expected the US would give them time to cut their oil imports over a longer period. 

Oil prices surged as the U.S. decision could greatly limit crude supplies. U.S. West Texas Intermediate crude futures ended Tuesday's session up more than $2, topping $70 a barrel for the first time since May 25. International benchmark Brent crude was up $1.60, or 2.1 percent, at $76.33 per barrel.

Oil prices also got support  from the temporary shutdown of Syncrude, an oil-sands facility in Canada and concerns about Libya's crude exports due to developments in the  country's ongoing conflict. 
Last week, OPEC and non-OPEC members including Russia agreed to ramp up production by as much as 1 million barrels a day to prevent price spikes. 

Market-watchers expressed concerns that OPEC producers will not have enough spare capacity to balance potential drops in production  after Iranian oil is cut from the market. Iran, is OPEC's third biggest producer and exports more than 2 million barrels per day. 

According to Reuters, Iranian President Hassan Rouhani said the new U.S. sanctions were part of a “psychological, economic and political war”, adding that Washington would pay a high price for its actions. He also promised Iranians the government would be able to handle the economic pressure. The U.S. has been sanctioning the Western Asian country for nearly 40 years. 

With reporting by Reuters, WSJ

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