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What to expect after Iran sanctions waivers expire?

Oil&Gas Materials 21 November 2018 10:47
US sanctions on Iran have now been priced into the market as the waivers program announced on November 5th allowed eight countries to continue import Iranian crude, Joseph Gatdula Head of Oil & Gas Analysis, Fitch Solutions Macro Research (a unit of Fitch Group) told Trend.
What to expect after Iran sanctions waivers expire?

Baku, Azerbaijan, Nov.21

By Leman Zeynalova – Trend:

US sanctions on Iran have now been priced into the market as the waivers program announced on November 5th allowed eight countries to continue import Iranian crude, Joseph Gatdula Head of Oil & Gas Analysis, Fitch Solutions Macro Research (a unit of Fitch Group) told Trend.

"The waivers were more lenient than anticipated creating an oversupply outlook for the market. When the waivers are set to expire in March more uncertainty will surround US policy on Iranian crude adding to more volatility in price," he said.

Gatdula believes that criticism of the generous waivers may lead to further tightening as the Trump administration looks to exert more pressure on Iran.

"However, we believe the US officials will favor preserving the global economy keeping the effect on oil prices limited. The prospect of gradual lowering of waivers in March is most likely with volumes slowly trending downward," said the expert.

Despite, the decreases in supply from Iran and Saudi Arabia the global oil markets remain over supplied at current rates, according to the analyst.

He pointed out that the US shale production and increases from other OPEC members and Russia over the summer and autumn have led to supply growth outpacing demand.

"In addition, new data suggests waning global demand growth for oil as a result of the China/US trade war, US interest rate increases, and the general slowing of emerging market economies adds further downward pressure on oil prices," Gatdula concluded.

US President Donald Trump declared Washington’s withdrawal from the nuclear deal with Iran in May 2018. Trump also announced the restoration of all sanctions against Iran, including secondary ones against other countries doing business with Iran. The United States re-introduced part of the sanctions against Iran on August 7, while the second batch of the sanctions came into effect on Nov.5.

The US government has agreed to let eight countries, including South Korea and Japan, as well as India, keep buying Iranian oil after it reimposes sanctions on Tehran. The waivers have been granted for six months.

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Follow the author on Twitter: @Lyaman_Zeyn

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