Bolton on Iran sanctions: We've already seen the consequences

Oil up as U.S. imposes sanctions on Iran, Tehran defiant

Iraqi Shi'ite Muslims hold portraits of Iran's late leader Ayatollah Ruhollah Khomeini (C), Supreme Leader Ayatollah Ali Khamenei (L) and Iraq's top Shi'ite cleric Grand Ayatollah Ali al-Sistani during a parade marking the annual al-Quds Day.
Image: KHALID AL-MOUSILY

https://www.yahoo.com/finance/news/oil-falls-u-grants-iran-sanction-waivers-eight-003736585--finance.html

By Stephanie Kelly

NEW YORK (Reuters) - Oil prices rose on Monday after a steep five-day slump, as the United States formally imposed punitive sanctions on Iran but granted eight countries temporary waivers allowing them to keep buying oil from the Islamic Republic.

The sanctions are part of U.S. President Donald Trump's effort to curb Iran's missile and nuclear programs and diminish its influence in the Middle East. 

Oil markets have been anticipating the sanctions for months. Prices have been under pressure as major producers including Saudi Arabia and Russia have ramped up output to near-record levels, while weak economic figures in China have cast doubt on the demand outlook.

News of waivers on the sanctions limited price gains, and recent weakness in equities markets have fed concerns about global oil demand, said Bob Yawger, director of futures at Mizuho in New York.

"We're not getting the price rally that many participants thought they were going to get out of the Iran sanctions situation," Yawger said.

Brent crude futures gained 89 cents to $73.72 a barrel, by 10:59 a.m. EST (1559 GMT). U.S. West Texas Intermediate (WTI) crude futures rose 57 cents to $63.71 a barrel.

Both oil benchmarks have slid more than 15 percent since hitting four-year highs in early October. Hedge funds have cut bullish bets on crude to a one-year low.

The United States has granted exemptions to eight countries, China, India, Greece, Italy, Taiwan, Japan, Turkey and South Korea, allowing them to temporarily continue buying Iranian oil, Secretary of State Mike Pompeo said on Monday. Some of these are OPEC member Iran's top customers.

U.S. officials have said the aim of the sanctions is eventually to stop all Iran's oil exports. 

Pompeo said more than 20 countries have already cut oil imports from Iran, reducing purchases by more than 1 million barrels per day.

Iran said on Monday it would break with the sanctions and continue to sell oil abroad.

China's foreign ministry expressed regret at the U.S. move.

Combined output from Russia, the United States and Saudi Arabia rose above 33 million bpd for the first time in October, up 10 million bpd since 2010, with all three pumping at or near record volumes.

The Abu Dhabi National Oil Co plans to boost oil production capacity to 4 million bpd by the end of 2020 and to 5 million bpd by 2030, it said on Sunday, from output of just over 3 million bpd.

Data from analysis firm Kayrros showed Iranian crude production was broadly unchanged in October from September, with barrels still hitting the market alongside additional production from Saudi Arabia and Russia. 

(Reporting by Stephanie Kelly in New York, Christopher Johnson in London and Henning Gloystein in Singapore; editing by Jason Neely and Louise Heavens)

‘Lomonosov Prospect’ successfully completes NSR transit

http://www.tankeroperator.com/ViewNews.aspx?NewsID=10205

On 30th October, 2018 at 23:59 Moscow time, ‘Lomonosov Prospect’, Sovcomflot's (SCF) Aframax using LNG fuel as its primary fuel, successfully completed a commercial voyage along the Northern Sea Route (NSR).

 

She delivered a petroleum product cargo loaded in South Korea and destined for Northern Europe.

The high-latitude voyage from Cape Dezhnev at Chukotka to Cape Zhelaniya of the Novaya Zemlya archipelago took the Arc4 vessel 7.8 days to complete, during which the tanker covered a distance of 2,194 nautical miles.

During the voyage, the crew successfully tested the ship’s engines and the fuel control systems using LNG, as well as the operation of navigation equipment and machinery in ice conditions and sub-zero temperatures.

The successful voyage has confirmed the vessel’s high manoeuvrability and icebreaking capabilities, as well as being a highly safe, environmentally friendly and efficient vessel, SCF claimed.

The tanker sailed along almost the entire NSR without icebreaker escort, having covered some 950 nautical miles in ice conditions. She was escorted by Atomflot's nuclear-powered icebreaker ‘Taimyr’ only when traversing the most navigationally and hydrographically challenging area of the Ayon ice massif in the East Siberian Sea.

The tanker’s Master was Dmitry Belozerov, who has extensive high-latitude navigation experience. In 2010, Capt Belozerov served as Chief Officer on SCF's Aframax ‘SCF Baltica’ – the first large-capacity vessel to complete an NSR transit.

The results obtained during this experimental voyage provided the foundation for developing marine transportation solutions for major industrial projects in the Arctic, such as Yamal LNG and Novy Port.

During the latest voyage, the crew was aided by a second Master/ice advisor.

‘Lomonosov Prospect’ is the second of six Aframaxes designed to operate on LNG as the primary fuel. She was delivered to SCF last month.

In September, 2018, SCFplaced with Zvezda Shipbuilding Complex orders for a series of two similar LNG-fuelled Aframaxes, both of which will be timechartered to Rosneft for 20 years each, following their deliveries.

In addition SCFwill provide technical supervision during the construction of the five similar LNG-fuelled Aframaxes for Rosneft, also ordered at Zvezda Shipbuilding Complex.

 

Upon the delivery of these vessels, SCF will provide a range of services to ensure the effective and safe management of these vessels, including the recruitment of high-skilled crews and their management.

Oil rally faces tidal wave of supply

https://www.yahoo.com/finance/news/oil-rally-faces-tidal-wave-supply-061054470.html

By Devika Krishna Kumar and David Gaffen

(Reuters) - The oil market's two-year bull run is running into one of its biggest tests in months, facing a tidal wave of supply and growing worries about economic weakness sapping demand worldwide. 

After topping out at more than $75 and $85 a barrel just a month ago, both U.S. crude and Brent benchmark futures have grappled with near-relentless selling. For a time, prices had some support on hopes that renewed U.S. sanctions on Iran would force barrels off the market. 

That changed in the last week. The world's three largest producers - Russia, Saudi Arabia and the United States - all indicated they were pumping at record or near-record levels, while the United States said it would allow waivers that could allow buyers to keep importing Iranian oil, lessening the threat of a supply crunch. 

Those factors, along with a spate of recent weak economic reports out of China and other emerging markets, have shifted the conversation back toward worries about oversupply, and pushed U.S. futures to lows not seen since April, interrupting an upward move that had consistently found support during the rally's modest pullbacks.

The structure of the U.S. crude futures curve had for several months indicated expectations for tighter supply, but future-dated contracts now suggest investors think markets could be awash in oil over the coming months.

"The magnitude of recent selling is strongly suggesting that global oil demand is weaker than expected as a result of tariff issues, especially between the U.S. and China," said Jim Ritterbusch, president of Ritterbusch & Associates. 

There has been an exodus among speculators as well. In the last two weeks, net bullish bets on oil have declined to the lowest level in over a year. Selling notably accelerated on Thursday after U.S. West Texas Intermediate crude futures fell below $65 a barrel, a level that had stood firm in previous selloffs during the summer and fall. 

The oil market ran higher in anticipation of this week's formal re-imposition of sanctions against Iran by the United States, and on concerns that supply from producers like Saudi Arabia would not be able to make up the difference.

However, the U.S. government said on Friday it will temporarily allow several countries including South Korea and Turkey to keep importing Iranian oil when U.S. sanctions come back into force on Monday, sparing them for now from the threat of U.S. economic penalties.

Still, some analysts believe the current selloff has come too far, too quickly. Major OPEC producers won't be able to add more supply should it become necessary, particularly with production in Iran, Venezuela and Libya still at risk. 

"A loss of 1 million bpd from Iran, further declines in Venezuela, coupled together with geopolitical disruption in Libya and Nigeria could easily wipe out what little spare capacity we have left," Bernstein analysts said this week. 

Output from the Organization of the Petroleum Exporting Countries, led by Saudi Arabia, rose to levels not seen in two years. U.S. production hit a record 11.3 million barrels a day in August, and Russia's output rose to 11.4 million bpd, a post-Soviet era peak. 

For U.S. crude, the key area to watch is between $64.45 and $64.80, where prices had found support in the past, said Fawad Razaqzada, analyst at futures brokerage Forex.com. If oil dips below this point, "the path of least resistance would be to the downside," he said.

For Brent, Razaqzada is watching the range between $69.50 and $69.60 a barrel, and if it were to slip below that, we could see a much larger correction, he said. 

(Reporting By David Gaffen and Devika Krishna Kumar in New York; Editing by Andrea Ricci)

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Finance Companies Express Interest in Port Harcourt Refinery

https://www.petroleumafrica.com/finance-companies-express-interest-in-port-harcourt-refinery/

NNPC, Nigeria’s state-owned oil company, revealed that a number of the finance companies it has approached to modernize the country’s refineries have expressed interest in the modernization of the Port Harcourt refinery.

“About three finance companies have expressed interest in the Port Harcourt refinery,” said a NNPC statement signed by NduUghamadu, Group General Manager, Group Public Affairs Division.

The official assured that according to the schedule set by the Ministry of Petroleum, the refineries will be fully operational by 2019 and will add their production capacity to that of the Dangote refinery that is currently under construction. The modernization of its refineries, along with the addition of the Dangote refinery, will bring the West African nation one step closer if not to the final step to the end of costly petroleum product imports.

The combined capacity of the Kaduna, Warri and Port Harcourt refineries is currently 445,000 bpd. The goal of the Nigerian government is to increase this production capacity.

Trump will reportedly allow India and South Korea to keep buying sanctioned Iranian oil

 

Indian Prime Minister Narendra Modi and U.S. President Trump hold a joint news conferences at the White House. Kevin Lamarque/Reuters

Tom DiChristopher | @tdichristopher

https://www.cnbc.com/2018/11/01/trump-near-deals-with-india-south-korea-on-iran-oil-imports-reports.html

• The Trump administration has agreed to allow India and South Korea to continue buying some Iranian crude, according to reports.
• Washington is threatening sanctions against countries that continue importing oil from Iran after a deadline on Nov. 4.
• Without waivers to continue purchasing Iranian oil after the deadline, foreign firms face the risk of being locked out of the U.S. market.

The United States is poised to grant waivers to India and South Korea that will allow the countries to continue buying oil from Iran, despite the renewal of U.S. sanctions next week, according to news reports.

The Trump administration gave oil buyers 180 days to wind down purchases of Iranian crude in May, when President Donald Trump announced he was abandoning a nuclear accord with Iran and restoring sanctions on its economy. The administration told importers to completely cut off purchases by Nov. 4, but it is widely expected to allow some countries to continue reducing purchases beyond that date.

On Thursday, the Economic Times reported that the administration will allow India to purchase 1.25 million tons of Iranian oil each month through March. A source told the English-language Indian newspaper that India and Washington have "broadly agreed on a waiver" and that "India will cut import by a third."

India, the second largest purchaser of Iranian oil, imported about 22 million tons from Iran in the 2017-2018 period, according to the paper.

High crude prices and a deteriorating Indian rupee have caused oil price inflation in the country and sparked protests over fuel costs. While Brent crude is trading at about $75, India is essentially paying double that after inflation, Fatih Birol, executive director of the International Energy Agency told CNBC this week.

The payment mechanism remains uncertain, but India is expected to continue paying for Iranian oil in euros and rupees, sources said. Iran would use rupees to pay for rice, drugs and other items, while the balance of revenues would be held in escrow until sanctions are lifted, the Economic Times reported.

Bloomberg News later reported that South Korea, in addition to India, has agreed to the outlines for a waiver with the United States. Bloomberg also reported that funds from Indian imports would go into an escrow account.

Sources told both news outlets an announcement from the administration could come in the next few days. The State Department did not immediately return a request for comment.

Several other oil importing nations are also seeking waivers.

Japan's top spokesperson for the government on Thursday said the nation had yet to receive a waiver, Reuters reported. China, Iran's biggest oil customer, has also sought a waiver, and its biggest refiners have reportedly halted imports in November until Beijing gets clarity from Washington.

U.S. sanctions have cut Iran's exports by roughly a third, with shipments shrinking to roughly 1.7 million to 1.9 million barrels per day by the end of September, according to estimates from several sources.

 

The sanctions were developed by Congress and implemented by the Obama administration, which marshaled international support for the policy in order to put pressure on Iran to negotiate restrictions on its nuclear technology program. The United States and five world powers reached a deal with Iran in 2015 that paved the way for sanctions relief the following year.

The Trump administration, hoping to secure a tougher nuclear accord and force changes to Iran's foreign policy, pulled the United States out of the accord in May over widespread international objection. The European Union is trying to preserve the nuclear deal, but the continent's multinational companies have dropped business ties with Iran under threat of U.S. sanctions.

The Obama administration allowed some foreign firms to gradually wind down their purchases from Iran so long as their home country reduced imports by 20 percent every 180 days. The Trump administration has not announced hard terms for waivers.