Oil prices rise as Iranian crude exports fall

Mae Love
October 10, 2018

In May, U.S. President Donald Trump's administration, which considers both Tehran and Moscow threats worthy of American sanctions, pulled out of the controversial Iran nuclear deal approved in July 2015 with Russia's help.

Besides, New Delhi sought to get around the restrictions by supplying goods including wheat, soybean meal and consumer products to Iran in exchange for oil.

Saudi Arabia said last week it plans to raise production in November from October output of 10.7 million barrels per day (bpd), indicating Riyadh will be boosting its supply to the highest ever level.

Some veteran Iran watchers cautioned against criticizing the administration for its decision to consider oil waivers, telling the Free Beacon it is very hard for nations to cut their imports to zero in the matter of months.

Indian Oil Corp will lift 6 million barrels of Iranian oil and Mangalore Refinery and Petrochemicals another 3 million barrels, the source said.

Speaking at "The Energy Forum" on Monday, oil minister Dharmendra Pradhan said two state refiners had placed orders for importing oil from Iran in November. The first round of sanctions took effect in August with a second round expected in early November.

Increasing tensions between the USA and Venezuela; the U.S. demanding an end to all imports of Iranian oil by early November; and the rupee's performance as Asia's worst performing currency of the year have compounded the situation and put India in a hard spot.

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On November 4, a second round of USA sanctions against Iran will target the oil industry, and impose penalties on oil companies, refineries, insurers and transport companies dealing with Iran.

That's down from at least 2.5 million bpd in April, before President Donald Trump in May withdrew the US from a 2015 nuclear deal with Iran and reimposed sanctions.

In its World Economic Outlook released late on October 8, the International Monetary Fund said Iran's oil-driven economy is expected to shrink by 1.5 percent this year as a result of declining oil exports, with the drop in economic output accelerating to 3.6 percent in 2019. These are the two factors affecting oil prices. The Indian basket represents the average of Oman, Dubai and Brent crude.

Pradhan said he had urged Saudi Arabia's oil minister to keep in mind the interests of oil consuming countries when it came to higher prices.

Moody's Investors Service in a report on Monday said the government's decision was credit negative for Indian state-owned oil marketing companies IOC, BPCL and HPCL. "The basic point is that they are all government companies", Pradhan said, according to The Hindu.

In the run-up to 2019 general elections, Fitch Ratings recently raised the spectre of return of state control on fuel pricing in India.

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