US may renew waivers to five of Iran's importers, analysts say

Opec said last week that it was "practically impossible" to drive down Iran's exports to zero

An oil tanker off the port of Bandar Abbas in southern Iran. The White House vowed last year to drive Iran's exports to zero . AFP

The US may continue extending waivers to five of Iran’s crude buyers for another six months, with the administration likely to consider market scenarios even as it looks to tighten the noose on Tehran’s oil industry.

"Given the market conditions and expected tightness towards the second half of this year, we believe that the US is most likely to continue extending basically the waivers for the key importing countries which are China, India as well as Korea and Japan," Iman Nasseri, managing director - Middle East at Facts Global Energy told The National in an interview.

The Trump administration last year slapped sanctions on Tehran and vowed to reduce its exports to zero as it looked to crush the Islamic Republic’s ability to earn oil revenues. However, it also granted eight buyers of Iranian crude waivers to continue importing, with the provision that they would scale back when the exemptions were up for renewal in May.

Three of the buyers - Italy, Greece and Taiwan - did not use their waivers to make Iranian purchases and are likely to be excluded when the administration revisits exemptions over the next couple of months.

"There’s no point for them to renew it,” said Mr Nasseri.

Iran, a key regional producer, has seen the status of its waivers become a critical factor impacting the oil markets over the near term.

Opec secretary general Mohammed Barkindo said last week that it was "practically impossible" to reduce Iran's imports to zero, after the group's meeting with non-member states that are part of a pact to cut supply .

Vandana Hari, Singapore-based founder and chief executive of Vanda Insights, said that Washington would look to tighten the choke-hold against Tehran’s oil industry particularly as its exports remained above targeted levels.

"Washington’s aim was to push down Iranian crude exports below 1 million bpd, but they have been around 240,000 bpd above that figure in recent months,” she said.

"That could be the agenda in current talks with importers for a renewal of the waivers beyond early May,” she added.

Iran’s production has declined by 860,000 bpd since the third quarter of 2018 following the imposition of sanctions to 2.74 million bpd in February, according to figures cited by Opec. Iran's exports on the other hand, according to estimates, were around 1.25 million bpd in February.

Iranian supply will remain squeezed around 700,000 bpd to 800,000 bpd or even a million bpd for the foreseeable future, according to estimates by London-based FGE. The curbs have impacted its economy, put downward pressure on its currency and causing inflation to surge.

"Given the signals in the market, we continue to believe that that will be the situation in the market for the next six months. Just below a million bpd is what we envision Iranian oil exports,” said Mr Nasseri.

On Wednesday, the US renewed Iraq's waiver to continue importing gas for power generation, according to report by Reuters citing an anonymous State Department Official.

Ms Hari clarified that the exemptions to Baghdad followed a “different cadence” to those granted to Iran’s oil buyers.

“[They are] 90-day renewals compared with those for Iran’s crude importers, which are for 180 days,” she said, and since they were offered in December they are now up for renewal three months later.