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India buys 75% less USA oil, loads up on Iran crude

08 October 2018

The Trump administration has said it is terminating a decades-old treaty affirming friendly relations between the USA and Iran in response to a United Nations court order. The U.S. State Department continues to ask for OPEC to tap its reserve supplies.

Fundamentals indicate a price in the high $70s for Brent, but the reality is seen above that, he said.

US West Texas Intermediate (WTI) crude futures rose 1 cent to settle at $74.34 a barrel.

Futures in NY increased 0.3 percent, on course for a fourth weekly gain.

In 2015, the administrations of former President Barack Obama and Iranian President Hassan Rouhani forged an unprecedented deal to lift extensive USA sanctions on Iran in exchange for the country to agree to restrict its nuclear activities, which it maintained were strictly for peaceful purposes.

The gains helped claw back some of the losses from the previous session due to rising USA inventories and after Saudi Arabia and Russian Federation said they would raise output to at least partly make up for expected disruptions from Iran.

But the pull-back did little to dent a 15-20 percent rise in oil prices since mid-August, which has pushed them to their highest since late 2014.

Oil is heading for the longest run of weekly gains since January on concern that higher Saudi and Russian output may not prevent a supply crunch as impending US sanctions squeeze Iranian exports.

India will buy a total of 9 million barrels of oil from Iran in November, foreign media reported yesterday, citing an industry source, despite United States sanctions on Tehran to return early next month. While the wider oil community in the region has expressed the opinion that the Saudi's may not be able to increase production to the extent that they have claimed, typically, the Kingdom has 1.5-2 million barrels per day of spare capacity meant to manage the market.

"Iranian export losses have already accelerated faster than we expected", said Paul Sheldon, S&P Global Platts Analytics' chief geopolitical adviser.

U.S. bank Jefferies said there was enough oil to meet demand, but "global spare capacity is dwindling to the lowest level that we can document".

However, Goldman Sachs says the rally may not last.

Estimates of the sanctions impact have increased sharply since May, when many analysts still expected the USA to grant widespread waivers to countries that make significant cuts, as the administration of Barack Obama did in 2012-15.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. It is not a solicitation to make any exchange in commodities, securities or other financial instruments.

India buys 75% less USA oil, loads up on Iran crude