The knowns and unknowns of US Iran oil sanction waivers

The knowns and unknowns of US Iran oil sanction waivers

USA crude production has accelerated to new records, OPEC output is at the highest in years and waivers will allow some Iranian crude to flow to the market despite US sanctions.

Brent crude LCOc1 had dropped from a four-year high in October above 86 dollars a barrel to 71 dollars on Tuesday.

While Iranian oil exports are expected to fall after U.S. sanctions took effect on Monday, reports from Opec and other forecasters have indicated the global oil market could have a surplus in 2019 as demand slows.

Oil's slump has been exacerbated by a USA decision to allow eight countries to continue importing from Iran even after it hits the OPEC member with sanctions.

The diplomat's comments echo the official stance of the Iranian government, which says the recent rise in oil prices has offset the impact of United States sanctions on Iran's oil exports.

Iran late past year inaugurated the port on the Indian Ocean which provides a key supply route to landlocked Afghanistan and allows India to bypass its arch-rival Pakistan.

The waiver means Iran will continue to produce and export oil; and fears of a sharp decline in Iranian supplies are overdone. Fund managers have started to establish short positions betting on further price falls (tmsnrt.rs/2P8LQ1S). In October, Iran's crude exports were estimated at 1.82 million bpd by data intelligence company Kpler and 1.5 million bpd by another firm that traces Iranian shipments.

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Background: Since U.S. President Donald Trump announced the United States' withdrawal from the Iran nuclear deal, OPEC oil production has increased from 31.9 million barrels per day in May to 33.3 million barrels per day in October despite declining oil output from Iran.

Crude has tumbled nearly 20 percent since touching a four-year high last month as bearish supply signals around the globe crowded out concerns about disrupted exports from Iran and Venezuela.

Two sources familiar with the matter told Reuters that the country would be allowed to buy 360,000 bpd of Iranian crude during the exemption period, which would be about half the daily average China has been importing from Iran since January 2016.

However, Washington granted temporary waivers to eight countries, including China and India, the biggest purchasers of Iran's crude. Iran is not a member of this committee, which it wants scrapped.

The Joint Ministerial Monitoring Committee (JMMC) and Joint Technical Committee (JTC) were set up as part of a deal between OPEC and other producers led by Russian Federation in late 2016 to curb oil supplies by some 1.8 million barrels per day (bpd).

An estimated 1.3 million-to-1.7 million barrels a day of Iranian exports could come off the market by the first quarter of next year and "that could climb" over the next round of discussions expected in six months, says Helima Croft, global head of commodity strategy at RBC Capital Markets.

India is, thus, being given time to phase out its oil imports from Iran in a calibrated fashion.

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