Economy

Oil drops on expectations Iran will maintain some exports

Oil drops on expectations Iran will maintain some exports”

Oil prices have extended a rally on expectations the sanctions will test the Organization of the Petroleum Exporting Countries and other producers.

India, the world's third-biggest oil importer, will buy 9 million barrels of Iranian oil in November, Reuters reported on Friday, citing two industry sources.

A gas flare on an oil production platform in the Soroush oilfields is seen alongside an Iranian flag in Iran, July 25, 2005.

"The U.S. government's tough stance raised the stakes for a more significant Iran export loss than previously foreseen", said Norbert Ruecker, head of macro and commodity research at Swiss bank Julius Baer.

Reuters said that Indian Oil would buy six million barrels of oil and Mangalore Refinery and Petrochemicals three million barrels.

Two domestic companies have placed orders to buy Iranian oil in November, oil minister Dharmendra Pradhan said on Monday, adding that the government does not yet know if it will be granted a waiver from United States sanctions on Iran.

Secretary of State Mike Pompeo said on a visit to India in September that some waivers from the sanctions might be granted to countries buying Iranian oil, but only if they agreed to cut their imports to zero.

"Iran's oil can not be replaced by Saudi Arabia nor any other country", Zanganeh said, according to his ministry's website.

With Iran sanctions still on the table, potential spare capacity constraints and also a slowdown in US drilling, USA bank J.P.Morgan said in its latest cross-asset outlook for clients that it recommended to "stay long Jan '19 WTI on supply risks to crude".

Iran has warned that if it can not sell its oil due to U.S. pressure, then no other regional country will be allowed to do so either, threatening to block the Strait of Hormuz.

India had diversified its oil supplies to cushion the impact of sanctions, he said.

Indian refiners imported around 10 million barrels of Iranian oil in October, and its November shipments are expected to be lower. -Chinese trade war could slow down economic growth and hit oil demand also weighed on the market, traders in Asia said.

US market participants also reacted to a bullish report by market intelligence firm Genscape showing crude inventories recently fell at the USA storage hub in Cushing, Oklahoma, analysts said.

Oil traders initially reacted to a selloff in Chinese stocks, but as the USA stock market opened higher, "we've pulled back dramatically", said Mark Anderle, an energy trader at TAC Energy.

Some Indian refiners recently made payments for Iranian oil in rupees, and could use the same mechanism in future to settle trade with Tehran if no other alternatives were found, state-run Indian Oil Company (IOC) Chairman Sanjiv Singh said.



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