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Trump to zero in on Iran’s oil exports - will it work ?

  • Spanish Market: Condensate, Crude oil
  • 08/11/24

Donald Trump's return to the White House poses questions for the oil market, not least what it might mean for Iran's rising crude exports. Early signs suggest Trump intends to dial up the pressure on Tehran and its oil sales, but repeating the playbook from his first presidency is unlikely to deliver the same result today.

Iran's oil exports have been on the rise since Joe Biden's election win against Trump four years ago. Before he took office, Biden's talk on the campaign trail about wanting to revive the 2015 nuclear deal — which Trump reneged on in 2018 before reimposing sanctions on Iran — created space for a relative easing of tensions. That, in turn, paved the way for a recovery in Iranian oil sales.

Iran's crude and condensate exports were averaging below 500,000 b/d throughout the second half of 2019 and 2020 as Trump-era sanctions took effect, but they began to tick up in 2021 and have carried on rising ever since. Exports averaged around 1.6mn b/d in January-October this year, according to data from analytics firms Kpler and Vortexa, just 500,000-600,000 b/d short of what Iran was selling in the two years before the sanctions were reimposed.

Biden's detractors, many from across the aisle, pointed to the recovery in Iran's exports as proof that his administration was not properly enforcing the sanctions imposed under Trump, and that it was intentionally looking the other way. Biden's team regularly dismissed those claims, insisting enforcement was ongoing.

The truth is that there is a cat and mouse game between sanctions enforcers and countries under sanctions. It took Iran 18 months to rebuild networks bypassing the sanctions regime. Russia, subject to a less onerous G7 price cap, similarly figured out ways to break through the sanctions noose. A batch of Iranian tanker-focused sanctions imposed under Biden since late last year appears to have had an effect on delivered prices to China, and yet Iran's exports have continued to climb.

Those were the days

A second Trump presidency will bring an opportunity for change. Given his first administration's hawkish stance towards Iran, there is an overwhelming expectation that he and his new team will set out to tighten the economic grip on Iran in an effort to limit Tehran's ability to financially support its proxies in the region.

The stated goal of Trump's maximum pressure campaign in 2018 was to drive Iran's oil exports to zero, from above 2mn b/d. And although it ultimately failed to deliver that, reducing exports to less than a quarter of pre-sanctions levels still constituted success. However, repeating that success in 2025 and beyond will be a tall order.

Analysts canvassed by Argus argue that pressing ahead with sanctions, even with stricter enforcement, would at best deliver a limited reduction, largely because Iranian oil trade today is not what it was in 2018.

"Today, everyone who had been wary of the implications of being involved has already left the game. And those who do remain are those who do not necessarily fear sanctions," said Iman Nasseri, managing director for the Middle East at consultancy FGE.

In 2018, around-three quarters of Iran's 2mn b/d or so of exports went to buyers in Europe, Asia-Pacific, Turkey and the UAE. The rest was going to China, to a mix of state-owned and private-sector companies. The threat of sanctions subsequently deterred almost everyone from taking Iranian crude except for Chinese independent refiners, pushing Tehran's exports below 500,000 b/d.

Chinese independents have since gradually increased their intake of discounted Iranian crude to the point that they have been collectively taking around 1.5mn b/d in recent months. The remaining 100,000-200,000 b/d has been going to Iran's allies Syria and Venezuela.

"With the majority of exports going to independent and private players in China who are not really worried about sanctions, or exposed to the US financial market, we should not expect a change in their behaviour," Nasseri says. "At best, we could be looking at a fall of 200,000-500,000 b/d" owing to increased enforcement.

Homayoun Falakshahi, senior oil analyst at Kpler, also expects limited results should Trump choose to again focus his efforts on sanctions and enforcement, unless he is prepared to work with Beijing to put pressure on those independent refiners that are single-handedly keeping Iran's oil lifeline open.

"Trump could try to trade off the Iranian issue with something of more significance to China," Falakshahi said, although he admits it will be "very difficult" to convince Beijing. "There would be significant pushback from Chinese officials, especially now, when refining margins are weak," he said. "You would be taking out one of the cheapest feedstocks going to Chinese refiners."

Falakshahi sees no real impact in the short term, given the vast and intricate network of middlemen and entities that Iran has built to facilitate its oil trade in recent years. But the market "could see a decrease of 500,000-600,000 b/d in Iranian exports" by the summer of 2025, he said.

A different approach

Another challenge for the new Trump administration is the speed at which Iran has been expanding its tanker fleet in recent years. Biden's administration has responded with a record number of vessel-specific sanctions this year. "And that could go further after Trump takes office," said Armen Azizian, senior oil risk analyst at Vortexa.

Some of the tankers that have been sanctioned by the US are "having difficulties on the water", he added. "We've seen cargoes on the water for longer, and some other tankers have been restricted to domestic trade. If they were to sanction more VLCCs, you would see an impact."

Even so, Tehran still has plenty of opportunity to carry on expanding its fleet.

"Iran has been growing its dark fleet for two years now," Azizian said. "The average age of the VLCCs joining the dark fleet has been 18 years, and there are many candidates that could join over the next year. So, while Trump could change how things are done, so long as Iran continues to expand its fleet, it shouldn't have a problem continuing its trade."


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13/12/24

Canada sets 2035 emissions reduction goal

Canada sets 2035 emissions reduction goal

London, 13 December (Argus) — Canada has set a new 2035 climate goal, aiming to reduce its greenhouse gas emissions by 45-50pc by 2035, from a 2005 baseline. This builds on its 2030 target of a 40-45pc emissions reduction, again from 2005 levels. Canada's emissions had been in 2015 projected to rise by 9pc by 2030, from 2005 levels, "but we are now successfully bending the curve", the Canadian environment and climate change ministry said. The newly-announced target is in line with a pledge Canada made at the UN Cop 29 climate summit last month. Countries that are party to the Paris climate accord must submit new national climate plans by 10 February 2025, to cover a timeframe up to 2035. Canada, the EU, Mexico, Norway and Switzerland committed at Cop 29 to set out new plans with "steep emissions cuts" that are consistent with the global 1.5°C temperature increase limit sought by the Paris Agreement. The plans are known as nationally determined contributions (NDCs). Canada's NDC is being considered by the cabinet, and the country plans to submit it by the deadline, Canadian climate change ambassador Catherine Stewart told Cop 29 delegates on 21 November. Tackling climate change is "both an environmental imperative and an economic opportunity", she added. The target was informed "by the best available science, Indigenous Knowledge, international climate change commitments, consultations with provinces and territories and expert advice", the ministry said. Canada will also "seek feedback on how to help companies take advantage of the economic opportunities that come with building a clean economy" in the near term, it added. Although the plan is not yet available, the ministry said that it will examine the role of carbon removal technologies for the energy transition. "Canadians are increasingly experiencing record-breaking extreme weather," the ministry noted. The country experienced record wildfires in 2023. Carbon emissions from wildfires this year were second only to the "unprecedented" levels in 2023, EU earth-monitoring service Copernicus found this month. Canada has a legally binding target of net zero emissions by 2050. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Opec+ decision reduces potential supply surplus: IEA


12/12/24
12/12/24

Opec+ decision reduces potential supply surplus: IEA

London, 12 December (Argus) — The recent decision by Opec+ members to delay a planned output increase has "materially reduced" a potential supply surplus next year, the IEA said today. Opec+ producers earlier this month pushed back a plan to start unwinding 2.2mn b/d of voluntary crude production cuts by three months to April 2025 and to return the full amount over 18 months rather than a year. Still, the oil market in 2025 is still likely to be significantly oversupplied, the IEA said in its Oil Market Report (OMR), given persistent overproduction by some Opec+ members, strong supply growth from outside the alliance and modest global oil demand growth. The Paris-based agency's base case forecasts show supply exceeding demand by 950,000 b/d next year, even if all Opec+ cuts remain in place. The supply surplus would increase to 1.4mn b/d if alliance members start increasing output from April as planned, the IEA said. This is far from guaranteed. Opec+ has already delayed its plan to increase output three times and continues to say a decision to unwind will depend on market conditions. While the IEA expects oil demand growth to remain subdued next year, its latest forecasts show a slightly higher outlook than in its previous report . The agency revised up its oil demand growth forecast for 2025 by 90,000 b/d to 1.1mn b/d, largely because of China's recently announced economic stimulus measures. This would see global consumption rise to 103.9mn b/d. But the IEA downgraded its oil demand growth forecast for this year by 80,000 b/d, to 840,000 b/d, mostly because of "weaker-than-expected non-OECD deliveries in countries such as China, Saudi Arabia and Indonesia." It said non-OECD oil demand growth in the third quarter, at 320,000 b/d, was the lowest since the height of the Covid-19 pandemic. The IEA said lacklustre demand growth this year and next reflects "a generally sub-par macroeconomic environment and changing patterns of oil use." Increases will be driven by petrochemical feedstocks, and demand for transport fuels "will continue to be constrained by behavioural and technological progress." On supply, the IEA downgraded its growth estimates for 2025 by 110,000 b/d to 1.9mn b/d. Most of this will come from non-Opec+ countries such as the US, Canada, Guyana, Brazil and Argentina. The agency nudged lower its supply forecasts for this year, by 10,000 b/d to 630,000 b/d. The IEA said global observed oil stocks declined by 39.3mn bl in October, led by an "exceptionally sharp" fall in oil product inventories due to low refinery activity coupled with higher demand. It said preliminary data show a rebound in global inventories in November. By Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Opec trims oil demand growth forecasts again


11/12/24
11/12/24

Opec trims oil demand growth forecasts again

London, 11 December (Argus) — Opec has revised down its global oil demand growth forecasts for 2024 and 2025 for a fifth time in a row. In its final Monthly Oil Market Report (MOMR) of the year, the producer group has cut its 2025 oil demand growth forecast by 90,000 b/d to 1.45mn b/d. This is entirely driven by a downgrade in its demand projection for the Middle East. From the start of this year right up until July, Opec had been forecasting global demand growth of 1.85mn b/d for next year. The group has also lowered its demand growth forecast for this year — by 210,000 b/d to 1.61mn b/d, mostly driven by reduced growth projections in the Middle East, India and the Americas. Up until July, Opec had been predicting that demand would increase by 2.25mn b/d this year. Opec's downward demand growth revisions slightly close the gap with other forecasters such as the IEA and EIA, which project much lower levels of consumption growth. The IEA sees oil demand growing by 920,000 b/d this year and by 990,000 b/d next year, while the EIA projects 890,000 b/d and 1.29mn b/d, respectively. On supply, Opec has kept its non-Opec+ liquids supply growth forecast for next year unchanged at 1.11mn b/d. But it has upgraded its estimate for this year by 50,000 b/d to 1.28mn b/d, underpinned by stronger-than-expected US production. Opec+ crude production — including Mexico — increased by 323,000 b/d to 40.665mn b/d in November, according to an average of secondary sources that includes Argus . The call on Opec+ crude remains 42.4mn b/d for this year and 42.7mn b/d for next year, according to the MOMR. Opec+ producers agreed earlier this month to delay a plan to start unwinding 2.2mn b/d of voluntary cuts by three months to April 2025 and to return the full amount over 18 months rather than a year. By Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Norway to end new international fossil fuel financing


10/12/24
10/12/24

Norway to end new international fossil fuel financing

London, 10 December (Argus) — Norway will from January no longer provide public finance for new unabated international fossil fuel projects, in line with a commitment it made in December last year. Norway's export credit agency, Eksfin, provides most of the country's financing for overseas fossil fuel projects. Eksfin provided between 8.78bn Norwegian kroner and 10.98bn NKr ($786mn- 983mn) over July 2021-June 2023 for fossil fuel projects, civil society organisation Oil Change International found. Norway signed the Clean Energy Transition Partnership (CETP) at the UN Cop 28 climate summit in 2023. The CETP aims to shift international public finance "from the unabated fossil fuel energy sector to the clean energy transition". The CETP, which now has 41 signatories, was launched at Cop 26 in 2021, with an initial 39 signatories including most G7 nations and several development banks. Signatories commit to ending new direct public support for overseas unabated fossil fuel projects within a year of joining. Abatement, under the CETP, refers to "a high level of emissions reductions" through operational carbon capture technology or "other effective technologies". It does not count offsets or credits. Australia, which also signed the CETP at Cop 28, said last week that it would no longer finance overseas fossil fuel projects. "Norway is also working to introduce common regulations for financing fossil energy within the international main agreement for state export financing in the OECD", the Norwegian government said today. Norway's policy "helps increase momentum" for an OECD deal that could end $41bn/yr in oil and gas export financing, Oil Change said. Countries are involved in "final negotiations" on the deal today, Oil Change added. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Opec+ crude output rises in November


10/12/24
10/12/24

Opec+ crude output rises in November

London, 10 December (Argus) — Opec+ members subject to targets increased their collective crude output by 150,000 b/d in November, marking the alliance's first monthly production rise since March, Argus estimates. Although output increased to 33.55mn b/d last month, it was still 3.97mn b/d below the level the group was producing at when it announced the first of its current round of cuts in October 2022. It was also 300,000 b/d below the group's collective production target for the month. November's increase was mainly driven by Kazakhstan, where output was boosted by the restart of the 400,000 b/d Kashagan project following maintenance in October. Kazakh production rose by 220,000 b/d to 1.56mn b/d last month, leaving the country 90,000 b/d above its official production target. Kazakhstan has been one of the group's biggest overproducers this year, alongside Iraq and Russia. It has repeatedly pledged to compensate for exceeding its targets but has so far largely failed to deliver. Iraq — the group's largest overproducer — has made progress in recent months in reducing its production. Its output in November was again 20,000 b/d below its target at 3.98mn b/d, the same as in October. But it will need further reductions if it is to fully compensate for past overproduction. Compliance with output targets is a key measure of group discipline and crucial to the success of Opec+ production policy. Argus calculates that eight members of the coalition have produced above their targets on average between January and October of this year. Opec+ producers agreed earlier this month to push back a plan to start unwinding 2.2mn b/d of voluntary cuts by three months to April 2025 and agreed to return the full amount over 18 months rather than a year. Last month's production increase by the entire group — including quota-exempt Iran, Libya and Venezuela — was 350,000 b/d, with total output at 39.03mn b/d. This was mainly driven by Libya, which increased its output by 160,000 b/d to 1.24mn b/d as it continued to ramp up after emerging from a partial oil blockade in early October. Iran's output rebounded by 60,000 b/d to 3.36mn b/d. By Aydin Calik Opec+ crude production mn b/d Nov Oct* Nov target† ± target Opec 9 21.12 21.18 21.23 -0.11 Non-Opec 9 12.43 12.22 12.62 -0.19 Total 33.55 33.40 33.85 -0.30 *revised †includes additional cuts where applicable Opec wellhead production mn b/d Nov Oct* Nov target† ± target Saudi Arabia 8.93 8.95 8.98 -0.05 Iraq 3.98 3.98 4.00 -0.02 Kuwait 2.40 2.43 2.41 -0.01 UAE 2.97 2.93 2.91 0.06 Algeria 0.91 0.91 0.91 0.00 Nigeria 1.40 1.42 1.50 -0.10 Congo (Brazzaville) 0.25 0.27 0.28 -0.03 Gabon 0.22 0.23 0.17 0.05 Equatorial Guinea 0.06 0.06 0.07 -0.01 Opec 9 21.12 21.18 21.23 -0.11 Iran 3.36 3.30 na na Libya 1.24 1.08 na na Venezuela 0.88 0.90 na na Total Opec 12^ 26.60 26.46 na na *revised †includes additional cuts where applicable ^Iran, Libya and Venezuela are exempt from production targets Non-Opec crude production mn b/d Nov Oct* Nov target† ± target Russia 8.97 8.97 8.98 -0.01 Oman 0.76 0.76 0.76 0.00 Azerbaijan 0.48 0.48 0.55 -0.07 Kazakhstan 1.56 1.34 1.47 0.09 Malaysia 0.33 0.33 0.40 -0.07 Bahrain 0.17 0.18 0.20 -0.03 Brunei 0.08 0.08 0.08 0.00 Sudan 0.02 0.02 0.06 -0.04 South Sudan 0.06 0.06 0.12 -0.06 Total non-Opec 12.43 12.22 12.62 -0.19 *revised †includes additional cuts where applicable Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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