Published: Wed, October 10, 2018
Money | By Ralph Mccoy

Despite US sanctions, India will buy oil from Iran in November

Despite US sanctions, India will buy oil from Iran in November

U.S. West Texas Intermediate and worldwide benchmark Brent crude oil futures are trading higher early Tuesday, continuing to recover from Monday's early session setback.

On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 1.20% at $73.45 a barrel.

India is the world's third-largest oil importer, and Iran's second-biggest oil customer after China.

India, a major buyer, has ordered Iranian oil for November, although New Delhi does not yet know whether it will receive such a waiver.

Refiners have already announced purchases of oil from Iran for November at levels nearly similar to those in October, despite the start of the sanctions on the 4 November.

Additional US sanctions, on Iran's oil and banking industries, will be imposed in November. The global benchmark hit a four-year high of $86.74 last week but slipped as low as $82.66 on Monday.

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Oil has been supported by concern that the Iranian export loss will leave a thinner margin of unused production capacity to deal with supply shocks. The grouping's June decision to increase production by around 1 million barrels per day (bpd), or around 1% of global supply, followed calls from the United States, China and India to help moderate prices. Of the 220.4 million metric tonnes (million MT) of crude oil imported by India in 2017-18, about 9.4% was from Iran.

The International Monetary Fund (IMF) estimates that Iran's economy fell into a recession this year that will get worse next year as a result of renewed US sanctions on Tehran.

In its March report on Iran's economy, published a month and a half before the USA announced that it was re-imposing sanctions on Iran, the International Monetary Fund expected that following the strong rebound after the 2016 nuclear deal, Iran's economic growth would be 4.3 percent in the 2017/18 fiscal year.

Iran exported 1.1 million barrels per day (bpd) of crude in that seven-day period, Refinitiv Eikon data showed.

Strangely, the market has ignored the fact that total OPEC output last month was at its highest level this year; and also the fact that Russian Federation and Saudi Arabia had agreed informally to raise output in the coming months. "It appears that consumer countries are to be given more time, after all, to replace their oil shipments from Iran so long as they at least reduce them". China is reportedly reducing its oil imports from Iran, though it's not likely to fully comply with the USA demands.

In the United States, almost 40 percent of daily crude oil production was lost from offshore U.S. Gulf of Mexico wells on Tuesday because of platform evacuations and shut-ins ahead of Hurricane Michael. The American Petroleum Institute is due to release data on Wednesday, while the U.S. Energy Information Administration is due to publish on Thursday.

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