US will fail to cut Iran oil exports to zero: ministry source

Ann Santiago
April 23, 2019

Secretary of State Mike Pompeo said on Monday the United States is not extending any waivers exempting importers of Iranian oil from US sanctions and there will be no grace period for those economies to comply. US West Texas Intermediate futures climbed as much as 2.9 percent to $65.87 a barrel, its highest since October 30.

The announcement comes almost one year after Trump announced the U.S. was withdrawing from the Iran nuclear deal.

Brent for June settlement climbed US$1.65 to US$73.62 a barrel at 9:11 NY on the London-based ICE Futures Europe exchange and earlier rose to as high as US$74.31, the highest intraday level since November.

The countries that received exemptions in November were China, India, Japan, South Korea, Turkey, Italy, Greece, and Taiwan.

He added the length of the sanctions being at zero depends on the Iranian Ayatollah and "his cronies" meeting certain demands.

President Donald Trump tweeted Monday morning that former Obama Secretary of State John Kerry might be in "big violation" of the Logan Act over his talks with Iran.

"What Secretary Kerry has done is unseemly and unprecedented", Secretary of State Mike Pompeo said in reaction to the news.

Prior to the reimposition of sanctions, Iran was the fourth-largest oil producer among the Organization of the Petroleum Exporting Countries (OPEC) at nearly 3 million barrels per day, but April exports have shrunk to well below 1 million barrels per day, according to ship-tracking and analyst data in Refinitiv. The economic pressure has reduced Iranian oil exports from more than 2.5 million barrels a day to less than 1 million, discouraged foreign investment, and sent the value of Iran's currency plummeting and inflation soaring.

He warned those countries still importing Iranian oil, that "the risks are not worth the benefit". The U.S. will also announce offsets through commitments from other suppliers such as Saudi Arabia and the United Arab Emirates.

Brent markets rallied rather stringently as well, which makes sense considering that Brent is more of a global benchmark and therefore it's going to be more sensitive to the Iranian situation. "How long we remain there, at zero, depends exclusively on the Islamic Republic of Iran's senior leaders", he said.

Saudi Energy Minister Khalid Al-Falih said in a statement Monday that the kingdom will coordinate with other oil producers to ensure adequate supplies are available to consumers while ensuring the global oil market "does not go out of balance". Turkey's already spinning out of its North Atlantic Treaty Organisation harness as it is, and India's complicated relationships with Pakistan and China make their reaction hard to gauge. "And what is the Trump Administration strategy toward Iran?"

"We will no longer grant any exemptions...we are going to zero", Mr Pompeo said from the state department.

Oil prices spiked after Sunday reports that the waivers would end and remained higher on Monday.

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