India is Iran's second-largest single oil customer after China and was expected to cut back on Iranian oil purchases following USA sanctions. Front-month ICE Brent futures settled above $86/b Wednesday, the highest in four years, before dropping back below $85/b Thursday.
US President Donald Trump's administration is considering sanction waivers for countries that are reducing their imports of Iranian oil, a US government official said on Friday.
Estimates of the sanctions impact have increased sharply since May, when many analysts still expected the U.S. to grant widespread waivers to countries that make significant cuts, as the administration of Barack Obama did in 2012-15.
On Thursday, Brent futures fell $1.65 a barrel (1.9 per cent) to $84.64 a barrel and U.S. futures were down 2.7 per cent at $74.33 a barrel.
West Texas Intermediate (WTI) for November delivery on Friday rose to US$74.34 a barrel on the New York Mercantile Exchange.
He put the country's oil exports volume at 2.8 million oil barrels per day (bpd) and reiterated that OPEC and non-OPEC member states can not make up for Iran's huge oil production volume in the global markets.
India will buy nine million barrels of Iranian oil in November, in a signal the world's third-biggest oil importer will continue purchasing crude from the Islamic republic despite U.S. sanctions coming into force on November 4.
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Further weighing on oil prices was "chatter that Saudi Arabia has replaced all of Iran's lost oil", said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.
In May, Trump withdrew from a multilateral nuclear deal with Iran and he re-imposed sanctions against Tehran. Saudi Arabia at present produces 10.7 million barrels per day.
Overall US exports also fell 917,000 bpd to 1.7 million bpd in the last week of September, according to the Energy Information Administration, as a stronger US dollar and Brent's premium to WTI fell, making US crude less affordable. "It now appears that only China and Turkey may be willing to risk USA retaliation by transacting with Iran".
Iran's key oil customers are opting for more medium sour crudes from Saudi Arabia, Iraq, Russia and UAE, which is causing prices of these grades to soar and putting pressure on global refinery margins.
Increased import from Iran brought down shipments from the US.
India's purchases of U.S. crude oil have fallen by 75 percent over the past four months as the subcontinent stocks up on Iranian crude, Reuters has reported.
"A strong economy, low unemployment would suggest the USA consumer is going to continue to fare well with higher energy prices", said Phil Flynn, an analyst at Price Futures Group in Chicago.