Oil prices spike as US prepares end to Iran sanctions waivers

The US reimposed sanctions on exports of Iranian oil in November after President Trump unilaterally pulled out of a 2015 nuclear accord. Above, an Iranian oil facility. (Reuters)
Updated 22 April 2019
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Oil prices spike as US prepares end to Iran sanctions waivers

  • US President Donald Trump wants to end the waivers to exert ‘maximum economic pressure’ on Iran
  • Global oil markets have also tightened this year because of supply cuts led by the OPEC

WASHINGTON/SINGAPORE: The United States is expected to announce on Monday that all buyers of Iranian oil will have to end their imports shortly or face sanctions, a source familiar with the situation told Reuters, triggering a 3 percent rise in crude prices.
The source confirmed a report by a Washington Post columnist 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 $74.30 a barrel, the highest since November 1, in early trading on Monday in reaction to expectations of tightening supply. US West Texas Intermediate (WTI) futures climbed as much as 2.9 percent to $65.87 a barrel, its highest since Oct. 30.
US President Donald Trump has made clear to his national security team over the last few weeks that he 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.
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.
On April 17, Frank Fannon, US Assistant Secretary of State for Energy Resources, repeated the administration’s position that “our goal is to get to zero Iranian exports as quickly as possible.”
Peter Kiernan, lead energy analyst at the Economist Intelligence Unit (EIU) said “a severe loss in (Iranian) volumes will put pressure on the supply side, given the political uncertainty currently blighting other oil exporters, such as Venezuela and Libya.”
Global oil markets have also 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 this year, and WTI more than 40 percent over the same period.
Kiernan said he expected the “Trump administration to try to rely on Saudi Arabia ... to reverse policy and increase volumes to calm market fears of oil supplies quickly tightening.”
Saudi Arabia is the world’s biggest exporter of crude oil and OPEC’s de facto leader.
“If there is a time for the US to be able to take a hard line it is now, with the Saudis having over 2 million barrels (per day) of spare capacity,” said Tony Nunan, oil risk manager at Mitsubishi Corp. in Tokyo.
An end to the exemptions would hit Asian buyers the hardest. Iran’s biggest oil customers are China and India, who have both been lobbying for extensions to sanction waivers.
South Korea, a close US ally, is a major buyer of Iranian condensate, an ultra-light form of crude oil that its refining industry relies on to produce petrochemicals.
Government officials there declined to comment as well, but Kim Jae-kyung of the Korean Energy Economics Institute said the end of the sanction waivers “will be a problem if South Korea can’t bring in cheap Iranian condensate (for) South Korean petrochemical makers.”
Japan is another close US ally in Asia that is also a traditionally significant buyer of Iranian oil.
Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corporation (JOGMEC) said the end of the sanction waivers “is not a good policy for Trump.”
Nogami said he expected oil prices to rise further because of the US sanctions and OPEC-led supply cuts.
So far in April, Iranian exports were averaging below 1 million barrels per day (bpd), according to Refinitiv Eikon data and two other companies that track exports and declined to be identified.
That is lower than at least 1.1 million bpd estimated for March, and down from more than 2.5 million bpd before the renewed sanctions were announced last May.


Budget carrier XL Airways seeks rescue deal with Air France

Updated 52 min 20 sec ago

Budget carrier XL Airways seeks rescue deal with Air France

  • XL Airways needs $38.6 million (€35 million) in fresh financing
  • XL Airways’ woes follow similar issues at French airline Aigle Azur

PARIS: French airline XL Airways has called on Air France to discuss a rescue deal to avert the collapse of the budget carrier that halted ticket sales and payments last week.
XL Airways, which has said it needs $38.6 million (€35 million) in fresh financing, requested in a statement on Sunday a meeting with Air France and the French authorities in the coming hours before a court is expected to put it into receivership on Monday.
In an interview with Le Journal du Dimanche, also published on Sunday, XL Airways’ Chief Executive Laurent Mignan said his airline could become Air France’s low-cost offer on long-haul routes.
An Air France spokeswoman declined to comment.
Air France, France’s historic national carrier, is part of the Air France-KLM group.
XL Airways operated four Airbus A330 aircraft and provided mainly long-haul flights to the Caribbean, the United States and France’s Reunion island.
XL Airways’ woes follow similar issues at French airline Aigle Azur. Aigle Azur’s unfolding bankruptcy is the latest among smaller European airlines struggling to contend with higher fuel costs and stiff low-cost competition.