Daily Management Review

Reuters: US sanctions against Iran and Venezuela create a shortage of heavy crude


Tightening of US sanctions on the Iranian oil sector will add to the many factors holding back world supplies of heavy and medium oil and increase its value, Reuters writes.

New restrictions on Iranian exports complement the previously imposed sanctions by Washington on Venezuela and the obstacles to mining in Angola.

In November, after leaving the international nuclear deal with Iran, the United States imposed sanctions affecting Iran’s oil sector.

The Donald Trump administration provided special exemptions for eight countries, allowing them to temporarily import Iranian oil even after the imposition of sanctions. However, exemptions from sanctions for the purchase of Iranian oil will cease to operate on May 2.

US officials say the global total oil supply will still remain sufficient, not least because of the boom in American shale oil. But most of the supplies, which remain in abundance, account for lighter varieties.

While some customers are willing to buy heavy and medium oil at elevated prices, others are holding back. For example, some of the regular customers of the Angolan state-owned oil company Sonangol refused to charge a premium, which prompted the company to offer oil to other buyers.

The current confrontation between buyers and sellers can partly be explained by uncertainty about how much Iranian oil can still flow to the market, especially to China, which is the largest consumer.

Analysts expect China to disregard the lifting of anti-Iran sanctions, especially since Washington may not want to impose sanctions on Chinese companies importing Iranian oil, which at the same time are key buyers of American oil and liquefied natural gas. This would make it difficult for sellers to raise prices.

source: reuters.com