As US financial sanctions against Iran come into force on June 28 and European Union sanctions banning oil imports from the Islamic Republic become effective July 1, major shifts in the global oil supply landscape look inevitable.
Importing countries have had time to prepare, and most have either secured waivers from the US sanctions by reducing their purchases of crude from Iran or have sourced alternative supplies from a market that most of the oil sector believes is amply supplied.
The International Energy Agency estimated on June 13 that oil importing countries had bought nearly 1 million b/d less crude from Iran in April and May than in late 2011 as a result of the tightening sanctions.
The agency also warned that Iran may need to shut in some production in the months ahead if its export options remain constrained and its available storage space fills up.
Nonetheless, the IEA said Iran had kept output steady in May at 3.3 million b/d compared with April.
The US sanctions, signed by President Barack Obama on December 31, seek to bar from the US financial system foreign banks that continue to have oil-related dealings with Iran’s Central Bank.
But Washington has offered waivers to countries that make “significant” reductions in their purchases of Iranian oil.
In recent months, many of Iran’s customers who might have been affected by the US measures have won exemptions by agreeing to reduce volumes.
These include some of Iran’s major customers in Asia such as Japan, South Korea and India but not Tehran’s top buyer China, which has made clear it will only respect UN sanctions and not unilateral measures.