US insists on total cutoff of Iran crude exports

The US administration will demand a total cutoff of Iranian crude exports by 4 November and is speaking with Mideast Gulf Arab producers to make up the gap in global supplies.

The US is insisting that foreign buyers of Iranian crude start reducing purchases now and eliminate all imports by 4 November, a senior State Department official said today. President Donald Trump reintroduced US sanctions on Iran last month.

"We are pushing (Iran's exports) down to zero," the official said.

And the US administration has no plans at this time to make exceptions. "I am hesitant to say ‘No waivers ever,' but our predisposition is we are not granting waivers."

The US plans to engage with its partners in the Middle East next week "to ensure that the global supply of oil is unaffected," the official said.

Preliminary Argus tracking puts Iranian crude exports at 2.39mn b/d in May. Iran's crude exports fell by around 1mn b/d in 2012-15 as a result of US sanctions. The EU at that time matched its sanctions policy with the US so European customers stopped buying from Iran altogether while Asia-Pacific customers scaled back purchases.

The US in 2012-15 did not demand a total, immediate reduction of Iranian imports - the policy at that time was to achieve a gradual, 20pc reduction every six months. And during that period, the US granted repeated waivers to countries that demonstrated efforts to reduce their Iranian imports.

But the US is applying a new metric to convey the seriousness of the administration's "maximum pressure" campaign against Iran. The US official acknowledged that stopping all Iranian purchases will represent "a challenge" for Iran's buyers. "This is not something that any country that imports from Iran wants to do voluntarily."

The US official spoke following a two week long outreach to European government officials and oil company executives to explain the implications of US sanctions. The US has not yet begun talks with China, India or Turkey, all major buyers of Iranian crude.

"We are worried about oil markets because we see strong oil demand growth of 1.4mn b/d, but at the same time we see major supply (challenges)," IEA executive director Fatih Birol said today on the sidelines of the World Gas Conference.

The free-falling output from Venezuela, sanctions on Iran and civil strife in Libya give cause to concerns that oil markets are not well supplied, Birol said. "This is something the world producers and consumers need to take, what will happen, when we see strong deficits in the oil markets. Iran is definitely a part of the challenge we are facing today."