The Oil Keeps Flowing: Iran Evades U.S. Sanctions

Crude Oil

Turkey has already made efforts to cut its purchases ahead of the USA sanctions, but would prefer to keep up some level of Iranian oil imports past November, an industry source familiar with the matter said.

Spare production capacity in the United States, which had been as much as 4 million barrels per day in 1968, had been used up by March 1972.

Oil fell more than $1 a barrel to below $79 on Thursday as the fourth weekly increase in US crude inventories suggested ample supply, while Saudi-US tension and falling Iranian exports lent support.

The U.S. has so far insisted that all purchases from Iran must drop to zero in an effort to put pressure on the Islamic republic to negotiate a new nuclear deal, after President Donald Trump in May walked away from a 2015 pact negotiated by Barack Obama.

The government is to offer oil in the form of at least 35,000-barrel-cargos and the total of one million barrels per day at IRENEX, he announced addressing the 4th Iranian Petroleum and Energy Club Congress & Exhibition in Tehran.

"Many European companies are leaving Iran, but [South] Korean firms have declared they will stay in Iran", he said, adding that Korean companies understand how important it is to be present in the Iranian market. In 2017, the South purchased 147 million barrels of Iranian oil.

This indicates rise in supply that would exceed demand, thus prices might remain in the range of $70 to $80 per barrel.

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Trump has repeatedly blasted OPEC over high oil prices and urged the group to pump more. But rising prices would hit the global economy and consumption hard and threaten a renewed oil market slump within a year.

The opponents also believe that offering oil in the stock market can not counter the sanctions, because this market works based on the free market which stands on supply and demand. When sanctions were imposed on Russian Federation and despite the increase in oil prices, the ruble remained weak.

"Stocks are rising in the United States, and the reason is because pipes out of the U.S. for exports are maxed out while USA production is rising", said Bjarne Schieldrop, Oslo-based chief commodities analyst at SEB AB. For example, if the United States were to halt or reduce production, the implications would be big because the price increase could be high.

Saudi Arabia promised to carry out a "thorough, complete and transparent investigation", while Erdogan said police found freshly painted walls and "toxic" substances during a search of the consulate, where Khashoggi was last seen alive. It has historically maintained its production in the range of 1.5 million barrels a day to 2 million barrels per day.

The uncertainty about oil prices stems from psychological factors and geopolitical concerns as well as investor speculation.

On July 1, Iran's First Vice President Es'hagh Jahangiri announced that in a move to beat USA sanctions, Iran will let private companies to export crude oil.

Randa Takieddine is a Lebanese writer and the director of Al-Hayat newspaper office in Paris.

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