The Daily Update - Trump Waivers

The White House confirmed yesterday that they would not extend waiver extensions in regard to Iranian oil exports, which is totally against markets expectations. This is thought to leave major importers from Iran, China at 613k b/d, South Korea at 387k b/d and India at 258k b/d open to secondary US sanctions relating to their Iranian oil imports and also opens further upside potential to oil pricing as the supply side is curtailed.

However, the US also specifically identified Saudi Arabia and UAE as nations that have agreed to boost supply to offset the lost barrels from Iran when waivers lapse on the 2nd May. Saudi has actually cut production by around 800k b/d in 2019 more than the commitment to the OPEC+ agreement and so does have room to open up production by as much as 400k b/d while staying within the scope of the December agreement. It will be interesting to see what Russia does as they have been extremely slow in coming into line with that agreement and the shortfall from Iran could be as much as 1mn b/d. As mentioned China, South Korea and India are the largest importers from Iran and all had waivers from the US and so the situation is a little fluid at the moment.

It is thought, in the market, that rather than just start pumping Saudi Arabia will be reactive to supply that is withdrawn from the market rather than being proactive, as seen in the past, and this could be another positive for oil pricing and a big distinction between now and 2018.

Strangely, Trump has always maintained pressure on Saudi to keep the oil price down and this move seems to fly in the face of that end objective, but hey, we should be use to this by now and not surprised by the President’s approach to any situation however confusing it may seem.

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