How buyers are lining up for Iran oil after U.S. exemptions

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Armed with waivers to keep importing oil from Iran without running afoul of U.S. sanctions, several countries are preparing to manage the repercussions of sanctions. Here is a list prepared by Bloomberg.

The exemptions mean at least some supplies from OPEC’s third-biggest producer will keep flowing into international markets, after Iran’s exports plunged by almost 40 percent since April, the month before Washington announced the curbs.

Almost all major buyers of Iran’s oil had negotiated with the U.S. for the waivers, arguing that cutting purchases to zero would affect their energy industries and boost fuel costs. The exemptions have been granted for 180 days, and will be reviewed toward the end of the period.

South Korea

Waiver: Up to 200,000 barrels a day of condensate

Purchases before sanctions: 300,000 barrels a day (condensate) in 2017

South Korea, the third-biggest importer of Iranian oil, was the first major buyer to cut purchases to zero. It’s now allowed to buy as much as 200,000 barrels a day, though actual imports may not be that high.

Purchases must be limited to cargoes of condensate, a type of ultra-light oil that’s critical for South Korea because many of the nation’s plants are geared to process it. The country bought about 300,000 barrels a day of South Pars condensate from Iran in 2017.

India

Waiver: Up to 300,000 b/d

Purchases before sanctions: 560,000 b/d in Jan.-Oct. 2018

India has been one of the most vocal negotiators for an exemption from the U.S. as the government faced protests over rising fuel costs before national elections next year. Under the exemptions, it will be allowed to import as much as 300,000 barrels a day. That’s under Iran’s average daily exports to the nation of about 560,000 barrels this year, and almost 450,000 barrels in 2017, shipping data compiled by Bloomberg show.

Indian refiners are expected to buy about 9 million barrels of oil for loading in November from Iran.

China

Waiver: 360,000 b/d

Purchases before sanctions: 658,000 b/d in Jan.-Sept. 2018

The biggest buyer of Iran’s crude is allowed to import 360,000 barrels a day under the exemptions. That doesn’t include oil produced by projects in the Islamic Republic in which Chinese companies have equity.

While China had bought about 658,000 barrels a day over the first nine months of this year, the government was said to have told at least two state oil companies to avoid purchasing the producer’s oil before the sanctions went into effect. That decision preceded an upcoming meeting between President Xi Jinping and U.S. counterpart Donald Trump and coincided with flaring trade tensions between the countries. Chinese ship owners had also stopped hauling Iranian oil.

Japan

Waiver: To Be Confirmed

Purchases before sanctions: About 160,000 b/d in Jan.-Sept. 2018

The nation’s refiners are likely to restart imports of Iranian oil now that it’s one of the eight recipients of exemptions, according to Japan’s Minister of Economy, Trade and Industry.

JXTG Holdings Inc., the country’s biggest refiner, echoed that view, saying it may resume purchases from the Persian Gulf state. However, the company did not elaborate on how much it could buy. Japanese processors halted purchases of Iranian crude in October under U.S. pressure.

Taiwan

Waiver: To Be Confirmed

Purchases before sanctions: About 16,000 b/d in Jan.-Aug. 2018

The chairman of Formosa Petrochemical Corp., Taiwan’s only publicly traded oil refiner, didn’t seem in too much of a rush to buy Iranian oil even though the island got a waiver.

“We don’t dare to sign any more contracts to buy Iranian crude oil after President Trump’s threat,” Chen Bao-lang said to Bloomberg. “But it’s not an issue for us, whether Taiwan got an exemption or not. It’s very easy to find alternatives.”

Taiwan has been weaning itself off the Islamic Republic’s crude for the past 10 years. In 2003, Iran’s share of imports peaked at around 18 percent. So far this year, the Persian Gulf state made up just under 2 percent.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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