Asian buyers of Iranian crude are well placed to overcome the end of US sanctions waivers as they have demonstrated they can live without it and as global producers have the capacity to make up a shortfall, according to analysts and trade data.
The United States on Monday demanded buyers of Iranian oil stop purchases by May or face sanctions, ending six months of waivers which allowed Iran’s eight biggest buyers, most of them in Asia, to continue importing limited volumes.
The announcement came amid an already tight market as the Organization of the Petroleum Exporting Countries (OPEC) and other major producers, including Russia, have been curtailing supply since January to prop up prices.
Global benchmark Brent crude futures rose to as high as $74.69 a barrel on Tuesday, the most this year. The surging crude will mean higher fuel costs for Asian economies. Iran’s four-biggest crude buyers are China, India, Japan and South Korea.
Despite the cost surge, supply shortfalls are unlikely.
The end of the waivers should cut Iranian exports by 900,000 barrels per day (bpd), Goldman Sachs said late on Monday. That is more than made up by “immediately available” spare capacity from producers including Saudi Arabia, the United Arab Emirates (UAE) and Russia of about 2 million bpd, which could rise to 2.5 million bpd next year.
In a statement on the end of the waivers, US President Donald Trump said the United States, Saudi Arabia, and the UAE would ensure oil markets are fully supplied.
“The United States have more than proved that they are able to fill any voids left by sanctions,” said Matt Stanley, a broker with Starfuels in Dubai.
Even if US output should fall short, Stanley said, “Saudi and the United Arab Emirates are going to ensure they will increase production to offset any loss in supply from Iran.”