The European Union has formally appealed to India, an important buyer of Iranian crude oil, for help in resisting the Islamic Republic’s nuclear program as early adjustments reported by the International Energy Agency indicate the market will remain amply supplied despite toughened sanctions.
At the 12th India-EU Summit Feb. 10 in New Delhi, European Council Pres. Herman Van Rompuy and European Commission Pres. Jose Manuel Durao Barroso urged Indian Prime Minister Manmohan Singh for help in pressuring Iran to resume negotiations over its nuclear development program, target of EU sanctions imposed on Jan. 23 (OGJ Online, Jan. 26, 2011).
In a statement after the meeting, Van Rompuy said he had asked Singh “to use India’s leverage towards Iran to help bring Tehran back to the negotiating table.”
India imported about 350,000 b/d of Iranian crude oil last year, according to IEA. It recently increased its purchases from Saudi Arabia and reached an agreement with Iran to pay for 45% of its oil purchases in rupees.
Although the EU embargo directly affects imports only by member countries, totaling as much as 600,000 b/d, EU and US sanctions on Iran’s central bank will hamper payments by other Iranian customers. IEA said the sanctions might cut Iranian exports, recently 2.6 million b/d, overall by as much as 1 million b/d. Outside the EU and India, Iran’s biggest oil customers are China, South Korea, and Japan.
Japan last month told the US it would cut its purchases of Iranian oil (OGJ Online, Jan. 13, 2012). And on Feb. 9, South Korea’s S-Oil announced signing of an unusual 20-year crude-supply deal with Saudi Aramco, a major shareholder, ensuring feedstock supply for its 669,000 b/d refinery at Onsan (OGJ Online, Feb. 9, 2012).
Saudi production will be crucial to market effects of the sanctions against Iranian oil.
In a move seen as assurance that it will compensate for diminished Iranian exports, Saudi Aramco lowered prices for March crude oil purchases by Asian customers. IEA, in its February Oil Market Report, cited recent assurances by Saudi Arabian Minister of Petroleum and Mineral Resources Ali Al-Naimi that the kingdom can increase oil production by nearly 2 million b/d in a matter of days to 11.8 million b/d.
IEA said Angola, the UAE, Libya, and Iraq are expected to bring new production capacity online during 2012 totaling 850,000 b/d. Supply from producers not belonging to the Organization of Petroleum Exporting Countries is expected to increase nearly 1 million b/d this year, it said.
The EU sanctions don’t take effect for existing Iranian oil exports until July 1, but buyers are finding other suppliers.
IEA said China, Iran’s largest oil customer and an open critic of the sanctions, is believed to be lifting about half the 550,000 b/d it had been buying from the Islamic Republic, partly because of a price dispute. The country has increased purchases from Saudi Arabia, possibly to fill new strategic storage facilities. China also has increased oil purchases from Angola and Russia.
Japan and South Korea are importing record amounts of crude from West Africa, IEA said.
“While there appears to be ample crude currently available in the market,” the agency said, “the stricter sanctions are nonetheless muddying the waters for the tanker industry.” Insurance rates have risen for tankers calling at Iranian ports or steaming within 12 miles of the Iranian coast.