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Oil Sanctions Against Iran Might Mean Crude Discounts

 

New oil sanctions are coming just around the corner for Iran, slated to take effect at the end of this month. It’ll mean less oil exports for the country and that means a sharp dip in the global oil supply. Especially in Asia, where Japan, China, South Korea and India are all heavy importers of Iran’s crude.

The loss in supply will be mostly supplanted through raising imports from Saudi Arabia, Russia and Angola. And given the current oil market, the sanctions will have less of an impact than might be expected, says Chairman of IHS Cambridge Energy Resource Associates, Daniel Yergin:

“In this kind of market, it is easier to adapt to them. I think if we were back where we were six weeks ago when oil was over $120 a barrel, there’d be a lot more concern that as these prices have come down, that’s taken – really actually takes pressure off the economies and if anything is helpful to economic growth and recovery.”

Also keeping prices low, despite the sanctions, is the continued ramp up of production from OPEC, now at its highest level of output since 2008. And since Iran, post sanction, is going to have to sell at deep discounts – or not at all – crude prices out of other Middle Eastern countries may follow suit, sending the cost per barrel down even further.