Business

U.S. Tightens Sanctions On Iranian and Venezuelan Oil

Tighter U.S. sanctions planned for May on Iranian oil have led to an increase in prices for scarcer barrels, curbing of the global supply of crude oil.

The new curbs on Iranian oil came after Washington banned Venezuelan crude oil, followed by output snags in Angola, which is another huge producer of dense crude oil that is often used for refined products like jet fuel.

Refiners are currently seeking heavy sweet crude oil that used to be available from Iran and Venezuela. This particular type of crude oil is useful in producing low sulfur oil, especially before the new shipping emission rules come out next year.

According to U.S. officials, overall global oil supply seems to plentiful in spite of the sanctions in place. However, the supply led by the United States Russia and Saudi Arabia is in lighter grades.

The price of heavier crude oil from Norway’s Heidrum and Grane has been firming in the past few months. The price of Grane went up over a $1 per barrel in April.

Iraq’s SOMO sold over 2 million barrels of heavy crude oil in April to China’s Unipec at a premium price of over $2 per barrel on its official selling price.

According to traders, the price offerings for different Angolan streams, which serve as an alternate for Iranian and Venezuelan crude oil is also at their highest ever.

Sonangol, the state oil company, is believed to have sold a large cargo of Dalia, one of its heaviest grades in the last week alone at a price that is $2 above dated Brent. This is a seven dollar increase for the past two years.

Although some clients are willing to purchase crude oil at elevated prices, many others are holding back. One potential buyer mentioned that they are trying to resist the price increase as much as possible.

Some of Sonangol’s customers were resistant to the markups, causing the company to offer crude oil to other buyers. Trading sources said that the oil sold quickly. The standoff between buyers and sellers is mainly caused by the uncertainty over the U.S. sanctions placed on Iranian oil and how much Iranian oil will continue to flow after the May 1 deadline after which importers have been instructed to halt purchases.

This week, China’s foreign ministry made a formal complaint to the United States about this move.

According to analysts China will probably flaunt the restrictions since Washington will probably hesitate to sanction Chinese companies that import Iranian crude oil as they are also key purchasers of U.S. oil and liquid natural gas.

Leave a Reply

Copyright © 2019. FinanceKnown. All Rights Reserved.