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India Preparing for Cut in Oil Imports From Iran

01 July 2018

Worse still, Iran was clearly in no mood to be seen rewarding Trump, who had been putting pressure on Opec to raise production ahead of mid-term elections in the USA in November.

A senior official at Iran's oil ministry told Tehran-based private news agency Tasnim "this big claim is not feasible because last month Iran shipped 2.8 million barrels of crude oil and gas condensate daily".

Nobkhat revealed that his government is creating an emergency budget which will be discussed by parliament along with the public budget.

India's Oil Ministry held a meeting with refiners on Thursday, urging them to scout for alternatives to Iranian oil, the sources said.

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As such, the addition of 1 mb/d from Saudi Arabia alone would lead to the OPEC+ group exceeding the production levels they just committed to, after factoring in additions from Russian Federation and other Gulf States.

Indian officials and executives at state oil companies were jolted two days back after U.S. president Donald Trump demanded zero import of Iranian oil by India, and other importing countries, from November 4 when USA sanctions on Iran related to the petroleum sector take effect.

The United States has reinstated sanctions against Iran after quitting the 2015 Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action. The Saudis are saying that they won't exceed their quota and they will put the extra oil in storage but the timing of this suggests that the Saudi's are getting ready to help keep the market supplied at a time when it will be tight due to the sanctions and the coming collapses of what's left of the Venezuelan oil industry.

With their end game in mind, Russian Federation first proposed that the combined output of OPEC countries and non-OPEC allies, such as itself, should jump 1.5 million barrels a day (bpd) from July. That's increasing the uncertainty in the global markets and as Iran is the third largest producer of crude oil and supplies from it covers a significant demand in the market. USA crude production is approaching 11 million barrels per day (bpd), and Saudi Arabia expects to match that in coming months as well. If the U.S.is successful at convincing most countries to stop buying oil from Iran, the outages could rise to as high as 2 mb/d, although that remains speculation.

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Trying to make up for disrupted supply, the Organization of the Petroleum Exporting Countries (OPEC) said late last week it would increase output. South Korea is also cutting its imports from Iran: in May, these fell to a two-year low of less than 180,000 bpd. Russian Federation is the largest non-member state contributor to OPEC effort and few countries have the spare capacity available to respond to potential supply-side shocks. But as the news about a jump in Saudi output filtered out, oil prices cooled.

But the real decisions on production policy are now being made bilaterally and outside the OPEC and OPEC+ structures.

Khalid al-Falih's deft diplomacy saved Opec the embarrassment of leaving Vienna at the weekend without an agreement on easing supply curbs to calm a red-hot oil market.

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India Preparing for Cut in Oil Imports From Iran