India expected to keep buying Iranian oil despite sanctions by US

Oil Barrels

Oil Barrels

File image of Dharmendra Pradhan.

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. The Trump administration is considering waivers on sanctions, a USA government official said on Friday.

Delhi is hopeful that Saudi Arabia and other members of the Organization of Petroleum Exporting Countries will heed United States calls for production to be boosted by one million barrels per day, as promised in June, which might help bring benchmark prices down.

Two companies in India, which in the past have been big buyers or Iranian oil, have ordered barrels in November, according to India's oil minister.

Citing the Kremlin, Reuters reported that Iranian Foreign Minister Mohammad Javad Zarif and his Russian counterpart Sergei Lavrov discussed ways to enhance Tehran-Moscow energy cooperation over the telephone on Monday. Paying in rupee is an option.

"Even without sanctions also, Iran had been accepting payments in rupee".

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India had thus far not publicly articulated its stand on the issue, but with the advance orders placed for November, has made it clear that India will not "zero out" its oil intake from Iran.

Singh said International Olympic Committee is importing the "usual" monthly volumes of oil from Iran. The global benchmark hit a four-year high of $86.74 last week but slipped as low as $82.66 on Monday. It is likely other buyers of Iranian oil - the EU, Japan and South Korea - may also be allowed to continue to buy from Iran for some more time.

India had planned to import about 25 MT of crude oil from Iran in 2018-19, up from 22.6 MT imported in 2017-18.

The deal envisaged the removal of nuclear-related sanctions against Iran in return for steps by the country to restrict certain aspects of its nuclear energy activities.

While the persistent fear of a supply shortfall triggered by sanctions on Iran coming into effect by early November had provided the market the thrust upwards, the huge flow of speculative capital prompted by worries over supplies has created huge net-long futures positions for financial investors which has exerted an exaggerated price action.

As the start date of the US sanctions on Iran's oil is less than four weeks away, the market is jittery and prone to emotional reactions regarding the two key uncertainties over the next couple of months-how much Iranian oil will be lost to the USA sanctions, and how much spare capacity Saudi Arabia can bring (or is willing to bring) to offset possible steep losses.

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