U.S. may announce waiver for India from Iran sanctions on Sunday

Andrew Cummings
November 2, 2018

WTI and Brent crude futures continued to trend lower following reports that the USA has agreed to let several countries keep purchasing Iranian oil.

The US plans to re-impose oil-related sanctions on Iran on November 4 to choke the Islamic Republic's biggest source of income and pressure it to renegotiate a new nuclear deal.

Already, through its pressure campaign, the USA has managed to reduce Iran's oil exports from 2.7 million to 1.6 million barrels a month, according to internal US estimates.

U.S. Arab allies Saudi Arabia and the United Arab Emirates as well as Israel have long sought for Washington to work to curtail non-Arab and predominantly Shiite Muslim Iran's influence in the Middle East, including in war-torn Syria. Iran could mix its oil with crude from neighboring Iraq, sell on the black market or try a barter system supported by the Europeans.

Iranian President Hassan Rouhani
Iranian President Hassan Rouhani

Oil is poised for the biggest weekly loss since February on concerns over growing supply at a time when speculation is increasing that US sanctions on Iran won't cut the OPEC producer's exports to zero.

USA crude inventories rose by 3.22 million barrels for a sixth week, the longest streak of gains since March 2017, the Energy Information Administration reported Wednesday.

The administration's decision to issue waivers to eight countries also marked a significant reduction from the Obama administration, which issued such exemptions to 20 countries over three years. "I don't know whether these waivers are permanent or temporary ones", IRIB quoted Iran's Deputy Oil Minister Ali Kardor as saying.

Oil prices LCOc1 rallied this year to a four-year high above $85 per barrel on fears Washington may want to cut Iranian oil exports to zero.

On Friday, Brent futures LCOc1 traded flat at around $73, having fallen 12 percent since the beginning of October.

An Indian government source told Reuters that the United States could announce a waiver for India on Sunday.

"We think Trump will agree to China importing some volumes, similar to the treatment that India and South Korea receive", Clayton Allen of Height Securities said in a note on Friday.

Despite the lower output from Iran, some exports from the Persian Gulf nation will likely continue if the Trump administration officially grants waivers to India, South Korea and potentially others.

"The US may use waivers to slow-walk implementation, but these will not apply indefinitely", Allen said.

The determination is needed under US law for Washington to impose sanctions on foreign countries that fail to significantly reduce their purchases of Iranian oil and petroleum products.

Russian Federation has been planning to import oil from Tehran but no major projects have materialized.

Other reports by iNewsToday