US eases off of Iran oil ultimatum: Update

Adds comments from Trump at end

The US administration today backed away from its earlier insistence that countries eliminate all crude purchases from Iran by 4 November.

Officials had pledged to target countries that fail to reduce their oil purchases from Iran to zero within four months. But today the State Department said the US will consider granting some waivers to the sanctions on Iranian crude sales.

"Our focus is on getting as many countries importing Iranian crude down to zero as quickly as possible," State Department policy planning chief Brian Hook said. "We are not looking to grant licenses and waivers broadly, but we are prepared to work with countries that are reducing their imports on a case by case basis."

Confusing messages last week from the US administration on the intensity of Iran sanctions have upended global oil markets. A background briefing by the State Department on 26 June, ruling out the possibility of waivers from the US' sanctions on Iran that go into effect on 4 November, sparked a surge in oil futures prices — something Washington has been at pains to avoid.

Today's briefing seemed an attempt at damage control. "Our goal with respect to the energy sanctions is to increase pressure on the Iranian regime by reducing to zero its revenue from crude oil sales," Hook said. "We are working to minimize disruptions to the global oil markets. We are confident there is sufficient spare global oil production capacity."

US law requires there be sufficient production capacity as a prerequisite for enforcing sanctions on Iran's oil sector. The White House in May, following President Donald Trump's decision to reimpose sanctions on Iran, informed Congress that enough crude supply is available globally to enable buyers of Iranian crude to significantly reduce imports from that country.

The sanctions law allows the administration to grant waivers for countries that take steps to cut back purchases from Iran. The US in 2012-15 granted repeated waivers to countries that demonstrated efforts to reduce their Iranian imports — interpreted as a gradual, 20pc reduction every six months. Trump's administration has yet to develop its own metric for assessing a country's efforts to cut sanctions.

Hook said he and treasury undersecretary Sigal Mandelker later this week will lead discussions with Mideast Gulf producers, following conversations with government officials and company executives in Europe and east Asia. Pressure on foreign firms already has led 50 of them to cut ties with Iran, Hook said.

Iran's crude exports slipped for a second consecutive month to average 2.28mn b/d in June, according to the country's oil ministry.

Trump, in a televised interview yesterday, called the expected decline in Iran's exports "the one negative" to his decision to reimpose sanctions on that country. But he insisted that Saudi Arabia and other Opec producers will make up for it. "I have a very good relationship with the king and with the crown prince of Saudi Arabia and the others around. And they are going to have to put out more oil."

Trump on 30 June claimed to have extracted a pledge from Saudi Arabia to boost output by 2mn b/d — an agreement that would have used up all of Saudi spare capacity. But the White House later clarified that Saudi King Salman bin Abdel-Aziz merely had affirmed the kingdom's intention to maintain 2mn b/d of spare capacity during a phone conversation with Trump.

Opec and other major oil producing countries on 23 June reached an agreement to raise oil production by about 1mn b/d in the second half of the year to offset expected losses from sanctions-hit Iran and from free-falling Venezuelan production. But Trump said yesterday "they allowed less than we thought — they have to put out another 2mn b/d in my opinion."