The US State Department's efforts to reduce Tehran's oil revenue to zero will bear no fruit, Majlis Research Center's director said.
"The country has its own traditional customers, namely China and India. Moreover, it will take advantage of special strategies to sell its crude oil," Kazem Jalali was also quoted as saying by Shana, the Oil Ministry's news agency.
Referring to looming US sanctions on Iran's oil sector, the official noted that US officials had "a wild dream" to remove Iranian oil barrels from the market, but soon they had to face the reality that the dream will never come true as not only Asian states but also Europeans will continue to purchase Iranian oil.
"The department has signaled that some importers could get leeway to taper off purchases beyond the deadline on November 4," he said, noting that the US has acknowledged that some oil buyers in countries such as China and Turkey will still be purchasing Iranian barrels after the deadline arrives.
"Europe is obliged to maintain its oil contracts with the country to show good faith in Iran's nuclear deal that was abandoned unilaterally by US President Donald Trump in May," Jalali said.
Reportedly, the European Union asked Trump for a blanket waiver so they can preserve the nuclear deal by maintaining business ties with Iran. The EU has put in place measures blocking the US penalties.
Jalali added that Iran’s oil exports stood at 2.3 million barrels per day during the first four months of the current fiscal year that started on March 21, higher than its average volume over the past year.
In July, crude oil exports reached 2.28 million bpd, while condensate—an ultra light oil—volumes hit 330,000 bpd, up 10% compared with that of the month before, Shana reported.
Iran’s largest oil customer—China—saw its imports increase by nearly 2% on the year to around 525,000 bpd in June, according to Reuters oil flow data. China plays a very significant role as it is in the middle of a trade war with the US and has threatened to increase tariffs on US oil shipments to the Asian country, which move could push Chinese refineries further toward Iran for securing their feedstock.
Market Reaction
The market has already reacted to the possibility of "zero" Iranian oil as analysts believe prices are set to jump.
The oil market is already going through a tight state and if US succeeds in removing the whole 2.4 million barrels of Iranian crude oil from the market, this would leave the global market tighter than at any time since the oil shocks of 1973 and 1979.
The US has counted on its Arab allies, especially Saudi Arabia, to offset the removal of Iranian oil from the market. But the truth is that despite the International Energy Agency's report, which says OPEC and non-member nations altogether have about 3.7 million barrels per day of spare capacity, the real spare capacity that Saudi Arabia and non-OPEC nations hold is much less than what is injected into the market by Iran.
According to the US Energy Information Administration, Saudi Arabia has never produced more than 10.42 million bpd on an annual basis (2016) or 10.63 million bpd in a single month (July 2016) in the last 20 years.
The kingdom has already increased output to compensate the losses in Libya, Angola and Venezuela, which means the nation has already used its spare capacity. There is strong consensus among analysts that maximizing output is not simple, and even if Saudis theoretically do so, sustaining the level over a long period will pose serious problems to their refineries.
