A Review of the Nigerian Energy Industry

Western sanctions tighten squeeze on Iran oil exports

01 March 2012, Sweetcrude, WASHINGTON – Western trade sanctions against Iran are strangling its oil exports before they go into effect, a U.S. advisory body has discovered.

This finding came amid warnings that any shortages will only push up crude prices and strain a weak global economy, according to Reuters/News Agency of Nigeria report.

With crude prices trading around 10-month highs and limited spare production capacity worldwide, the United Statesmay offer Iran’s biggest customers waivers from the oil sanctions, which take effect June 28.

Iran is the world’s fifth largest oil exporter and the second-biggest producer in OPEC after Saudi Arabia.

It’s biggest customers, including China, Japan and India have become tangled up in U.S.-led sanctions aimed at curbingIran’s nuclear ambitions, which have also revived fears of a global recession.

High crude prices present a major challenge for politicians seeking re-election, including for U.S. President BarackObama.

He may face a backlash from voters paying a U.S. gasoline price that is climbing towards record levels of four dollars a gallon.

Obama, however, can grant waivers if doing so would be deemed in the nation’s interest.

“With oil inventories and spare OPEC production capacity running low, consumers don’t have much buffer againstadditional disruptions in supply,” said Trevor Houser, a partner at Rhodium Group and a former State Department adviser.

“That means the needle the administration has to thread to pressure Iran without raising oil prices has gotten even smaller.”

The Energy Information Administration (EIA), an independent arm of the U.S. Department of Energy, said on Wednesday that Western insurers were declining to cover the trade risk on some Iranian oil shipments.

On June 28, Washington will slap sanctions on foreign banks facilitating Iran’s oil trade, making doing business withTehran all the more difficult.

On Wednesday, news emerged that the U.S. government recently forced Dubai-based Noor Islamic Bank to stop channeling Iranian oil money, cutting off another of Iran’s links to the international banking system.

The world’s biggest electronic bank clearing system, SWIFT, is also preparing to block Iran’s central bank from using its network to transfer funds.

In a sign of Iran’s difficulties, traders said Tehran was trying to sell about 200,000 tonnes of crude oil from a supertanker floating off Singapore.

They also said a vessel heading towards China was carrying more oil than the usual term-contract supplies.

Asian nations buy almost half of Iran’s oil exports, but the U.S. sanctions have forced them to either reduce the amountthey buy or look for alternative suppliers.

Iran is India’s second-biggest oil supplier after Saudi Arabia.
New Delhi revealed on Wednesday it had sought up to 80,000 barrels per day extra oil from Iraq in 2012/13, days after placing a similar request with top exporter Saudi Arabia.

The EIA report, which looked at global oil output and prices over the last two months since Obama signed the sanctionsinto law, said oil supplies have become increasingly tight.

This is largely due to the looming embargo and string of production outages in Yemen, Syria, South Sudan, and the North Sea.

The report said global spare crude production capacity was “quite modest” by historical standards, and estimated aglobal supply gap of 1.6 million barrels per day if Iranian oil was completely taken out of the picture.

Iran has threatened to retaliate against the sanctions by closing the Strait of Hormuz, a waterway which carries nearly 20per cent of the global oil trade

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  • Voketo

    May God help us, where is d world leading to?