JUL 2, 2018 (BE2C2): Iran will allow private companies to export crude oil, part of a strategy to counter US sanctions, and is urging fellow OPEC members, including regional rival Saudi Arabia, not to break output agreements, state media and officials said on Sunday.
Iran is looking at ways to keep exporting oil as well as other measures to counter sanctions after the United States told allies to cut all imports of Iranian oil from November — America’s defense and strategic partner India was told last week by its Ambassador to UN Nikki Haley to curb oil imports from Iran while backing Delhi’s plan to develop the Iranian seaport of Chabahar to open up a trade route to Afghanistan and Central Asia.
On Tuesday a senior State Department official described tightening the noose on Tehran as “one of our top national security priorities”.
India is the biggest buyer of Iranian oil after China, while both are largest importers of crude oil in the world. India already asked refiners on Thursday to prepare for a “drastic reduction or zero” of Iranian oil imports in order to protect its exposure to the US financial system.
Iran has responded with its “private export” idea as a means to thwart US moves to make its oil a stranded asset while at the same time reminding OPEC members not to breach the output agreement.
“Iranian crude oil will be offered on the bourse and the private sector can export it in a transparent way,” First Vice President Eshaq Jahangiri told an economic event in Tehran broadcast live on state television.
“We want to defeat America’s efforts … to stop Iran’s oil exports,” he said.
“Oil is already being offered on the bourse, about 60,000 barrels per day, but that has been only for exports of oil products,” Jahangiri said. Iran has an oil and petrochemicals bourse as part of its mercantile exchange.
Meanwhile, Iranian Oil Minister Bijan Zanganeh sent a letter to the Organization of Petroleum Exporting Countries (OPEC) asking its members to adhere to the group’s agreement reached last month to collectively raise output and “refrain from any unilateral measures” that could undermine the unity of the producer group.
Referring to reports that Saudi Arabia may increase its oil exports to replace Iranian oil in world markets, Jahangiri said: “Anyone trying to take away Iran’s oil market (share) would be committing great treachery against Iran and will one day pay for it.”
The leader of Saudi Arabia promised U.S. President Donald Trump that he can raise oil production if needed and the country has 2 million barrels per day of spare capacity, the White House said on Saturday.
The OPEC agreed with Russia and other oil-producing allies on June 23 to raise output from July, with Saudi Arabia pledging a “measurable” supply boost, but giving no specific numbers.
“Any increase in the production by any member country beyond commitments stipulated in OPEC’s decisions … would constitute a breach of the agreement,” Zanganeh wrote in his letter, seen by Reuters and also reported by state media on Sunday.
Iran had been pushing hard for oil producers to hold output steady as U.S. sanctions are expected to hit its exports.
But Saudi Arabia, OPEC’s biggest producer, was keen to raise output to meet calls from Trump and major consumers such as India and China to help cool oil prices and avoid shortages, according to Saudi officials including Energy Minister Khalid al-Falih.
Amid ongoing battle of wits, last week global crude oil prices increased about $3 a barrel — since June 21, crude oil has gained more than $6 to reach $79.5 a barrel as the US seeks stronger compliance of its sanctions against Iran.
“With the Trump administration working towards zero Iranian exports by November, Libyan oil supplies at risk due to clashes with militias, and crashing supply from Venezuela, reports of tightening U.S. supply is keeping oil on edge,” Phil Flynn, the senior market analyst for the PRICE Futures Group in Chicago, said in a daily emailed newsletter.
Libya, Iran and Venezuela are all members of the OPEC and all three are facing ongoing production and export issues.
Speaking at a global gas conference on Thursday, U.S. Energy Secretary Rick Perry acknowledged that lack of Iranian barrels was a stress on the market, but expressed confidence that outside suppliers could make up for the difference.
“We look at this as an opportunity for OPEC members to fill this gap, if you will,” Perry was quoted by S&P Global Platts as saying.
Nonethless, oil prices are projected to undergo some level of roller-coaster ride. The decision of a cartel of key oil-producing countries to raise output by a million barrels per day is seen as insufficient to meet the rising demand, and has aided the recent surge in prices.
For India this could be a nightmare scenario. A weaker rupee, along with zooming oil prices, has begun to hurt Indian economy and consumers. The rupee last week fell to a record low of more than 69 to a dollar. India’s import bill is set to balloon as the country imports nearly 83% of its crude oil requirement.
The South Asian country’s state-owned oil companies determine local prices of petrol and diesel using international fuel rates and the currency movements. International prices of petrol and diesel follow the crude oil trajectory, albeit with some lag.
According to Indian paper The Economic Times, Indian Oil Corporation’s website, a key source of pricing information for petrol and diesel prices, has changed the way it publishes fuel prices, making it slightly difficult for people to know fuel rates. It has also stopped publishing historical price data for all previous years.