Asian buyers of Iranian crude are likely to reduce their off-take substantially over the coming quarters on the expectation of a re-imposition of US sanctions and uncertainty over the provision of waivers from Washington, research firm BMI said in a note.
Oil exporters in the Middle East such as Saudi Arabia, Iraq, the UAE and Kuwait will likely grab Iran’s market share in Asia ahead of the anticipated cutback, the note read.
Iran is one of the big suppliers of crude to Asia, with China, India, Japan and South Korea importing more than half of its total exports of 2.7 million barrels per day. China, which is currently in the middle of a trade war with the US is likely to continue to procure Iranian crude.
Iran, which ramped up its exports to pre-sanctions levels over the last couple of years following the lifting of sanctions in 2016 after a deal was struck with Europe, the US, China and Russia the previous year, will see its resurgent oil industry take a hit after President Donald Trump's administration exited the nuclear deal in May.
Following the exit, the US administration has given an ultimatum to Iran’s crude buyers to cut back their supplies before November 4. While it was understood that some customers may seek waivers from the US to continue investments in Iran or buy crude, Washington has been opaque on the procedure to seek exemptions.
Imports of Iranian crude have already declined in Asia to 220,000 bpd over the first half of the year, a decrease of around 22 per cent year-on-year, noted BMI. Iran accounts for eight per cent of crude supply in Asia, which relies on around 57 countries to meet its growing fuel requirements.
Iran, which supplies largely medium to heavy crude grades has seen cutbacks from refiners in South Korea who suspended their July loadings of crude and condensate following government pressures over shipping insurance issues and lack of clarity over waivers.
Japan, as well as Taiwanese refiner Formosa Petrochemical Corporation, are expected to follow suit.
Meanwhile, exports to the main Asian buyers from Saudi Arabia, Iraq, the UAE and Kuwait saw a two per cent year-on-year increase over May and June.
China and India, which continued to import Iranian crude during the earlier sanctions on Iran increased imports on a year-on-year basis during the same period, though the latter is likely to succumb to US pressure and slow imports.