Iran Oil Sanction Waivers Expiring in May
Apr. 30, 2019
The Trump administration recently announced that all waivers for the purchase of oil from US-sanctioned Iran will expire in May. China, India, Japan, South Korea, Taiwan, Turkey, Italy, and Greece were provided waivers to assist in the transition to alternative oil sources. The White House stated that the goal is to bring Iran’s oil exports to zero and "deny the regime its principal source of revenue."
Of the eight oil buyers, Greece, Italy, and Taiwan have stopped buying Iranian oil while the other five requested extensions. South Korea and Japan have greatly reduced oil purchases from Iran and are not expected to have their industries negatively affected by the waiver expiration. China, India and Turkey are highly dependent on Iranian oil and have made public statements to challenge US jurisdiction "in their transactions with a neighbor." China purchases 40 percent of Iran’s oil shipments which constitutes 6 percent of China’s total oil imports.
The Trump administration is hoping for Iran to return to the table and negotiate a new nuclear deal. The announcement has increased global crude oil prices this week. Looking toward H2 2019, various industry agencies are predicting upward price pressures on tight oil supplies resulting from the exclusion of Iranian oil from the market. OPEC members such as Saudi Arabia and other non-OPEC countries such as the US are increasing output to mitigate supply pressures, but some oil analysts express concern that the effort may not be sufficient.
US Secretary of State Mike Pompeo warned countries about violating US sanctions. While China has more negotiating power and various financial outlets, India and Turkey have more considerations given the ongoing trade discussions with the administration.
Analysts point to a direct correlation between crude oil prices and finished steel prices. Finished steel prices have been showing softness in the global mart, but the expectation of higher oil prices may point to higher finished steel prices for the remainder of 2019.