Oil mkt on alert as Iran sanctions hit

LONDON, Nov 04 (AFP): US sanctions against importers of Iranian oil threaten the crude oil market's precarious balance and risk surging prices, all under Saudi Arabia's watchful gaze, according to experts.

"In the next weeks all eyes will be on Iranian exports, whether there will be some cheating around US sanctions, and on how quickly production will fall," said Riccardo Fabiani, an analyst for Energy Aspects.

The US will from Monday target buyers of Iranian oil in order to deprive Tehran of its main source of income.

Going after Iran's oil money will hit Tehran where it hurts, but it also means hitting a major pillar of the global oil market - Iran is the OPEC cartel's third-largest producer - with major consequences for world supply.

Iran exported the equivalent of 2.5 million barrels a day in April, before the announcement of sanctions turned buyers away. "Even if the United States grants exemptions, Washington will demand that the volume imported from Iran be significantly reduced," said UBS analyst Giovanni Staunovo, who expects prices to rise.

However, oil prices have fallen by nearly $15 in less than a month, after peaking in early October at their highest level in two and a half years, with a barrel of Brent at over $85.

Part of the explanation lies in the ambiguous position of the US, which initially insisted that the sanctions were designed to reduce Iranian exports to zero barrels, but has since has softened its position.

Secretary of State Mike Pompeo on Friday announced exemptions for eight countries, without naming them.

Turkey indicated that it was one of them and analysts believe that India, one of the world's largest importers, is also on the list, which will be published on Monday.

"India said to the US that they can't stop before March, they are facing a major currency crisis," explained Joel Hancock, analyst at Natixis. Consumer confidence in the US itself could also suffer if rising oil prices translate into higher prices at the pump.

Reuters from Ankara adds: Turkish Trade Minister Ruhsar Pekcan said on Saturday that Turkey has received initial indications that it will be among eight countries to be granted a waiver from US sanctions against Iran, but is awaiting clarification on Monday,

NATO member Turkey depends heavily on imports to meet its energy needs and neighbouring Iran has been one of its main sources of oil because of its proximity, the quality of its crude and favourable price differentials.

"Initial information coming in is that Turkey will be amongst eight exempt countries. But we don't know for sure yet. It will be clear on Monday," Pekcan told reporters in Ankara.

An industry source said last month that Turkey had already made efforts to cut its purchases ahead of the US sanctions, but would prefer to keep up some level of Iranian oil imports.