Oil market on alert as Iran sanctions hit

Saudi oil output capacity may be close to maxing out

But the exemptions granted to Iran's biggest oil clients - China, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey - allow them to import at least some oil for another 180 days and could mean exports start to rise after November.

It imported about 172,000 barrels per day (bpd) of Iranian crude previous year, down 24.2 percent from 2016, trade ministry data showed.

US President Donald Trump's administration in May reinstated all sanctions lifted under the 2015 nuclear deal, targeting both Iran and countries that trade with it in oil, financial transactions with its Central Bank and the country's port sector.

On Monday, global benchmark Brent crude oil futures were up almost 0.8 percent to $73.41 a barrel and USA crude futures were up 0.4 percent at $63.41.

"The decision by the U.S. (to grant waivers) represents a departure, for now, from the stated aim of reducing Iran's oil exports to zero", said Pat Thaker, regional director for the Middle East and Africa at the Economist Intelligence Unit.

The sanction aim to block global trading of Iran's key exports of crude oil, natural gas and petrochemical products and prohibit dealing with Iranian energy, shipping and shipbuilding companies and the Central Bank of Iran. Companies that monitor Iran's shipments are already seeing a drop in tanker activity this month.

European nations still a part of the nuclear deal have sought to offer protection for its firms to continue trading with Iran.

"Today, Iran is able to sell its oil and it will sell", Mr Rouhani vowed as the sanctions kicked in.

"It would be up to the judgment of private firms, but based on this decision, the (Japanese) companies would likely prepare for resuming Iran crude imports", Seko told reporters.

More news: China Premier Li Keqiang is optimistic on US-China relations

The replacement of Iran's oil supplies by other countries following the USA imposition of sanctions is seen as a political bluff, Shana reported Deputy Chairman of the Iranian Parliament's Energy Committee Hussein Amiri Khamkani as saying on Sunday.

S&P Global Platts reported today that South Korea would be able to take around 4 million barrels a month (130,000 bpd) of Iranian crude and condensate under a USA sanctions waiver.

Hoyer alleged that by "tearing" up the Joint Comprehensive Plan of Action (JCPOA), the Trump administration has isolated the United States and undermined the multilateral efforts to curb Iran's "dangerous" behaviour.

China and India, in that order, are the top two importers of Iranian oil.

Both sources were not permitted to talk to the media about Iran sanctions and declined to be identified.

The wide-ranging exemptions have reduced fears of a supply shortage, taking pressure off companies, governments and economies around the world that have struggled with the surging cost of fuel.

"We have the toughest sanctions ever imposed but on oil we want to go a little bit slower because I don't want to drive the oil prices in the world", Trump said on Thursday.

However, oil prices have fallen by almost $15 in less than a month, after peaking in early October at their highest level in two and a half years, with a barrel of Brent at over $85. That caused prices of benchmark Brent crude to dip down from over $80 a barrel in recent days. The measures restore all the US sanctions that had been lifted under the accord that gave Iran billions of dollars in sanctions relief in exchange for curbs on its nuclear program. Including condensate, an ultra-light form of crude, shipments peaked around 3 million bpd in mid-2018, according to trade data in Refinitiv Eikon.

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