Iran's crude exports fell further in the first week of October, according to tanker data and an industry source, taking a major hit from USA sanctions and throwing a challenge to other OPEC oil producers as they seek to cover the shortfall. But Iran, OPEC's third-largest producer, has repeatedly announced that its oil exports can not be reduced to zero because of high demand levels in the market. Buyers of the superlight crude are under more pressure than importers of "regular" crude since there are few alternate suppliers.
In the previous round of sanctions from 2012 to 2015, India continued to buy Iranian crude although it had to cut purchases significantly to protect its wider exposure to the USA financial system. The bulk of spare capacity is held by Saudi Arabia.
India, however, wants to keep importing oil from Iran, because Tehran offers discounts and incentives for them at a time when the Indian government is struggling with higher oil prices and a weakening local currency.
India, a major buyer, has ordered Iranian oil for November, although New Delhi does not yet know whether it will receive such a waiver.
However, a US government official said on Friday that the country could consider exemptions for nations that have already shown efforts to reduce their imports of Iranian oil.
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Zangeneh further said any country that makes claims about supplying the market with more oil to replace lost Iranian exports had no "determining impact" on the market, but would lead to short-term psychological outcomes.
The U.S.is imposing the sanctions because Iran has reneged on a 2015 nuclear deal-a point on which other major powers disagree-and because it wants Iranian forces to pull out of Syria and Iraq. Of the 220.4 million metric tonnes (million MT) of crude oil imported by India in 2017-18, about 9.4% was from Iran.
Saudi Arabia said last week it plans to raise production in November from October output of 10.7 million barrels per day (bpd), indicating Riyadh will be boosting its supply to the highest ever level.
US market participants also reacted to a bullish report by market intelligence firm Genscape showing crude inventories recently fell at the USA storage hub in Cushing, Oklahoma, analysts said.
"Everytime China cuts interest rates, they increase oil consumption", said Phil Flynn, an analyst at Price Futures Group in Chicago. She said the sanctions that would come into force on 4 November were created to bring Tehran to book and not to penalise India, which meets 83% of its crude oil requirements from outside.