Balancing Act---Sanctions, Venezuela, Trade War and Demand

After the term 'blowhard' in your post I simply quit reading it as it then became a politically biased piece of work regardless of further content.

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1 hour ago, Jan van Eck said:

I would be surprised if Iran ends up shut-in.  First, the waterways to ship Iranian crude from Kharg Island are international.  Nobody is in a state of declared war against Iran, so it can and will use that waterway (strait of Hormuz) same as everybody else.  The so-called "embargo" is Donald Trump exercising his blowhard privileges.  Can he stop anyone from buying Iranian crude?  Of course not.  What he can do is block payment transfers for that oil through US banks.  OK, so there are lots of other banks.  He can shout about blocking payments made in US Dollars.  But hey, nobody is carrying around suitcases of hundred-dollar bills to pay for a tanker-load of oil.  It is all done by electronic funds transfers.  So a non-US bank sending cash to the Bank of Iran is hardly going to get socked.  

What Trump can do, in theory, is institute a "secondary boycott."  that is when Trump declares to say India:  "You buy their crude, and you cannot export your goods into the USA."  Now, the threat of that is sufficient to totally spook say the South Koreans, who cannot risk the interruption of their goods outflows to US markets.  How about India?  Would they really care?  Probably not. 

Once that Iranian oil is "landed" in say India, then it becomes sanitized.  I would expect trading houses to go re-sell that oil into the world markets, by simply transferring it to some other ship.  It now gets labelled as Nigerian oil, or whatever, some place where record keeping is a bit rough and nobody really knows the provenance of that oil.  If the Chinese or the Japanese buy it in good faith, hey who is to blame? 

there are lots of countries that will ignore the "sanctions."  And some will buy and re-ship.  How about Russia?  Will Putin do that just to stick it into the US eye?  Probably.  End result:  Iran is not getting tossed out of the oil sales game.  

 

"Once that Iranian oil is "landed" in say India, then it becomes sanitized.  I would expect trading houses to go re-sell that oil into the world markets, by simply transferring it to some other ship.  It now gets labelled as Nigerian oil, or whatever, some place where record keeping is a bit rough and nobody really knows the provenance of that oil.  If the Chinese or the Japanese buy it in good faith, hey who is to blame? "

There is such a thing called, crude oil finger printing which can trace the crude oil to the specific area it was produced in by using biomarkers and other specific signatures of each and every crude oil stream from around the world. Even if the Iranian crude oil is blended with others, it will still retain its signatures in the samples.

It was used during the oil embargo of Iraq on numerous occasions to trace the origin of the oil. They used to "trans-ship" the oil and also did lightering to move the embargoed oil from smaller barges onto ocean faring vessels. Yes a cargo of Iranian oil can "land" in India and they can trans-ship , they will have to change the certificate of origin, customs documents, export documents , just to name a few things that are involved in the physical international trade of crude oil. India is probably not going to "forge" those documents and risk bigger threats for a few dozen cargoes of oil. This has been done before , the "forging" of documents and will happen again, but I doubt the Indian Gov. and the state owned refiners are going to engage in these shady acts. Yes some other countries may, which run, the flags of convenience for "ghost" ships but they dont sail for too long. Eyes in the skies, vessel signatures etc, well equipped far reaching navies etc.

Illicit trade may continue but not sufficient to sustain Iran for a long time.

 

 

 

Iran may not be shut down to zero barrels of exports , but looking at the previous sanctions imposed, they took a major hit in their exports and revenues. Even with this new no waiver stance, if they only export half of what they are doing now, that will send them the message.

Yes non US banks can skirt around using non US based banking networks, however there are few banks in the world that are not exposed to the US banking system and therefore US banking laws and sanctions. If a branch or an affiliate of a foreign bank does any business within the US or with US banks and are also a correspondent bank, Under the PATRIOT ACT they have to be certified as such and if they violate US sanctions , they will lose that certification. It may not mean a lot to a layperson but it means a lot to a bank. Yes there will still be banks that will do some form of business despite the sanctions but they also risk their operations to a certain degree, Iran may also choose to barter oil for other goods and services...................

The secondary boycott is also a very effective resource in containing and managing how countries "act" in interests of trade and reciprocity of some  agreements with the US. India at this point does not want to "upset" the US  and they will act in their best interests for a good trade value. Indian refiners have increased their purchase of US crude to offset the loss of Iranian barrels and have pledged to buy larger volumes of US crude throughout 2019 and beyond.

Japanese have already said they will shut out Iranian barrels.

BTW, here it is just in, fresh off the press!!!!!!

"India to observe US sanctions"

 

4/23/19 7:47 AM

India to observe US sanctions on Iranian oil

NEW DELHI — India said Tuesday it will buy crude oil from other major oil producing countries in view of the United States’ decision this week to end waivers that allowed it to buy Iranian oil without facing U.S. sanctions.

External Affairs Ministry spokesman Raveesh Kumar said the Indian government would continue to work with partner nations, including the United States, to find ways to protect India’s energy and economic security interests.

India bought 23.6 million tons of Iranian oil in the financial year ending in March 2019, said Y.K Baweja, India’s Petroleum Ministry spokesman. He did not give details of India’s plans after the U.S. waiver ends on May 2.

Iran was the third largest oil supplier for India after Iraq and Saudi Arabia. Imports account for more than 80% of India’s oil needs.

In November, the U.S. granted a six-month waiver to India and seven other countries to continue importing oil from Iran. Washington decided to eliminate all Iranian oil revenue, which it says funds destabilizing activity throughout the Middle East and beyond.

The sanctions would choke off more than $50 billion a year in Iranian income, U.S. Secretary of State Mike Pompeo said in Washington on Monday.

 

http://www.dailyjournal.net/2019/04/23/as-india-iran-oil/

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1 hour ago, Jan van Eck said:

I would be surprised if Iran ends up shut-in.  First, the waterways to ship Iranian crude from Kharg Island are international.  Nobody is in a state of declared war against Iran, so it can and will use that waterway (strait of Hormuz) same as everybody else.  The so-called "embargo" is Donald Trump exercising his blowhard privileges.  Can he stop anyone from buying Iranian crude?  Of course not.  What he can do is block payment transfers for that oil through US banks.  OK, so there are lots of other banks.  He can shout about blocking payments made in US Dollars.  But hey, nobody is carrying around suitcases of hundred-dollar bills to pay for a tanker-load of oil.  It is all done by electronic funds transfers.  So a non-US bank sending cash to the Bank of Iran is hardly going to get socked.  

What Trump can do, in theory, is institute a "secondary boycott."  that is when Trump declares to say India:  "You buy their crude, and you cannot export your goods into the USA."  Now, the threat of that is sufficient to totally spook say the South Koreans, who cannot risk the interruption of their goods outflows to US markets.  How about India?  Would they really care?  Probably not. 

Once that Iranian oil is "landed" in say India, then it becomes sanitized.  I would expect trading houses to go re-sell that oil into the world markets, by simply transferring it to some other ship.  It now gets labelled as Nigerian oil, or whatever, some place where record keeping is a bit rough and nobody really knows the provenance of that oil.  If the Chinese or the Japanese buy it in good faith, hey who is to blame? 

there are lots of countries that will ignore the "sanctions."  And some will buy and re-ship.  How about Russia?  Will Putin do that just to stick it into the US eye?  Probably.  End result:  Iran is not getting tossed out of the oil sales game.  

Rootin Tootin Putin may actually benefit from the oil embargo/sanctions on Iran. Russia can supply the Chinese the shortfall in Iranian oil, Chinese wont mind and it would be closer to them for shipping costs and logistics, they can avoid the whole Strait of Hormuz scene and take the Russian barrels increased volume via rail and pipeline (s) that was built and being built to ship Russian crude and gas to China.

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1 hour ago, Douglas Buckland said:

After the term 'blowhard' in your post I simply quit reading it as it then became a politically biased piece of work regardless of further content.

Perhaps to no surprise, you are mis-quoting me.  Look again.  I said  "{the president] exercising his blowhard privileges."   Every President has, and has used, the presidential blowhard privileges.  It has nothing to do with "party" and nothing to do with "personality."  Hectoring, or jaw-boning, is the great advantage conferred on every President.  The President is fully entitled to harangue, hector, make a speech, to the point where the presidency is called the "bully pulpit."    You want to turn that into some "politically biased" thing, then you do both me and this Forum a dis-service.  I am neither biased for nor against Mr. Trump.  Like all Presidents, he has his issues, and I have repeatedly stated here that as to that, I simply shrug my shoulders.  He does good things, and he does lousy things.  That is the nature of the folks that run for those Offices. 

If he wants to go yell at the Iranians, then hey, he got elected, not me, so he can go right ahead.  The point I make is that there will inevitably be plenty of folks who will ignore him and figure out ways around his "sanctions," which, let us remember, are totally unilateral, and have no support from others.  As a practical matter, Mr. Trump is attempting to bend the entire planet to his personal will.  Whether or not he is successful in that remains to be seen.  Personally, I don't think he will be successful.  Europe is not behind him, and there is no UN Resolution to confer any legitimacy.  It is purely a US political move.  One thing that was well learned from George H.W. Bush (41) is the great value of consensus.  Before he had the Army take back Kuwait, he built a consensus of other nations, a number of which sent troops into the field along with the Americans and the Saudis.  In taking on Iran, he has no consensus.  The countries that are knuckling under, such as South Korea and Japan, are doing so out of fear.  In the long term, that never works. 

Since you are not happy with my English, there is nothing I can do for you. I invite you to express yourself in this column in Dutch, and let us know how you make out. I remind you English is my third language.  If you are offended by the use of "blowhard privileges," then you go suggest an alternative descriptor. And do it in French, la langue diplomatique

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21 hours ago, Douglas Buckland said:

If there is not enough diesel refining capacity, why will the 'storage' disappear? If you can't refine into product it will simply remain in the storage tanks and then, once again, we will be over supplied and the price of crude will 'tank' (pun intended).

There is sufficient refining capacity for diesel even with the lower sulphur requirements. The refineries that are equipped to handle that will have to switch their configuration around to suit the product slate volume and quality adjustment and then their finished product blending process. Refineries will also have to adjust to new lighter sweeter crude grades with lower sulphur. This means the US shale industry will be in demand for their lighter sweeter better distillate yielding crude oils. This also means the price of the lighter sweeter crude oils will be higher with the demand.

There is sufficient refining capacity around the world, they will just need to reconfigure the refining process and some of their equipment to get a product slate that yields more of the low sulphur products as well as changing their refinery feedstock blending requirements to yield more low sulphur distillates and not as much of the fuel oil or residuals. This also means that the demand for lighter , sweeter, low sulphur (US shale crude oils) will go up maybe 1,500,000-2,800,000bpd. It also means that a number of new technologies are being developed and will be developed to cope with the specification requirements. We are currently testing (with success) 3 separate processes/technologies to upgrade existing refinery product slate from fuel oils to diesel grades and make them compliant with low sulphur requirements.

There are dozens of other companies who are also doing similar R&D and testing. We are at the stage whereby we have tested our proprietary technologies on a scale of 35,000bpsd to 125,000bpsd in different locations around the world.

Dual fuel capable vessels will be efficient and over the long term cost effective. There are several companies that are using LNG as bunkering fuel.

The most efficient, cost effective way to successfully implement the new IMO requirements is within the refining system.itself trough the technologies of upgrading existing "standard" run diesel and other fuels and also upgrading heavier , higher sulphur crude oils into lighter , sweeter, lower sulphur crude oil.

From all the demand for the low sulphur diesel and fuels, one thing is for sure, refineries that are not capable of processing low sulphur higher grade sweeter crudes will have to reconfigure their refineries to process the sweeter crudes and the demand for the lighter , sweeter crude will go up , meaning the US shale industry will be more in demand for the light sweet shale crude oils they produce and huge global demand for the US shale crude oils from the Permian, Marcellus, Utica, Eagle Ford , Bakken etc. High API, low sulphur crude oils, they may end up commanding a premium over Brent and TAPIS benchmarks including the US condensates being produced.

Other countries produce lighter sweeter crude oils from the West African region, Australia, from the North Sea (contrained now) with Brent falling and the basket of North Sea crude oils lumped together as BFOE (Brent, Forties, Oseberg, Ekofisk), Mid East also has ligther sweet crude such as the ones from KSA Berri Light and Arabian Super Light and some from the UAE and Oman Crude and Condensates.

I believe that if the US oil companies play a disciplined role , the US industry will see a major boost in the coming few years given the numerous geopolitical situations, regulatory requirements etc and technology will play a key role in every aspect of the industry.

 

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2 hours ago, ceo_energemsier said:

There is such a thing called, crude oil finger printing which can trace the crude oil to the specific area it was produced in by using biomarkers and other specific signatures of each and every crude oil stream from around the world.

Sure, that technology exists.  But remember that there is no international consensus on embargoing Iranian oil.  It is all-USA.  Thus, the real question is:  so what? Is anybody really going to go "fingerprint" some oil cargo?  Or does everybody adopt the posture of innocent opacity?  

2 hours ago, ceo_energemsier said:

Illicit trade may continue but not sufficient to sustain Iran for a long time.

there is nothing "illicit" in trading in Iranian oil.  Where does "illicit" come from? Iran is under sanctions only from the US.  There is no UN Resolution of Embargo.  Europe is not part of an Embargo.  "Illicit" implies that there is some form of international sanction voted on by the civilized world.  That is not the case.  So if there is nothing illicit, who is going to ask a lot of questions about the provenance of some oil shipment?  Only the USA.  So what?  It does not get destined to the USA.  At least, not that anybody would admit to. 

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3 minutes ago, Jan van Eck said:

Sure, that technology exists.  But remember that there is no international consensus on embargoing Iranian oil.  It is all-USA.  Thus, the real question is:  so what? Is anybody really going to go "fingerprint" some oil cargo?  Or does everybody adopt the posture of innocent opacity?  

there is nothing "illicit" in trading in Iranian oil.  Where does "illicit" come from? Iran is under sanctions only from the US.  There is no UN Resolution of Embargo.  Europe is not part of an Embargo.  "Illicit" implies that there is some form of international sanction voted on by the civilized world.  That is not the case.  So if there is nothing illicit, who is going to ask a lot of questions about the provenance of some oil shipment?  Only the USA.  So what?  It does not get destined to the USA.  At least, not that anybody would admit to. 

When the key major buyers of Iranian oil walk away from it because of US Sanctions, it becomes illicit then at that point if they engage in the trade. In the physical oil trade on a global basis, oil cargoes are frequently "fingerprinted" for a variety of reasons. One of the factors would be insurance for the cargo. Again, the major buyers of crude oil that are walking away from Iranian crude oil and not pouring  it into their refineries are also part of the "civilized world", their rejection of Iranian barrels in any amount says that they do follow and adhere to the US sanctions.

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12 hours ago, ceo_energemsier said:

The bulk of the IMO compliant fuel for vessels will be produced by refineries globally where the laws are enforced more stringently unless there are waivers. A similar situation arose back in the 2000s when a similar rule was put into place for lower sulphur and emissions. Vessels having on-board diesel upgrading techs is not very cost effective at this time. Refineries in the US, EU , Singapore, Japan and other major refining hubs will try to comply with the new rules by installing the processes and technologies that are available to get the compliance or will get exemptions for a certain time frame.

From all the demand for the low sulphur diesel and fuels, one thing is for sure, refineries that are not capable of processing low sulphur higher grade sweeter crudes will have to reconfigure their refineries to process the sweeter crudes and the demand for the lighter , sweeter crude will go up , meaning the US shale industry will be more in demand for the light sweet shale crude oils they produce and huge global demand for the US shale crude oils from the Permian, Marcellus, Utica, Eagle Ford , Bakken etc. High API, low sulphur crude oils, they may end up commanding a premium over Brent and TAPIS benchmarks including the US condensates being produces.

 

 

 

 

Here is the thing about onboard scrubbers!

__________________________________

"

WILL “SCRUBBERS” HELP THE SHIPPING INDUSTRY?

Shipowners can install kit called a “scrubber” that strips out sulphur emissions and allowing them to use the dirtier fuel oil. Some ships already have them. Global trading firm Trafigura has ordered scrubbers for its fleet of 32 ships.

But the equipment alone can cost $1 million to $6 million, according to manufacturer Wartsila, putting it out of reach of many operators.

By 2020, about 2,000 ships could have scrubbers, according to Wartsila, SEB Bank and industry analyst AlphaTanker.

Scrubbers are “No Silver Bullet” for Shipping Industry, Wartsila Says

But AlphaTankers’ Andrew Wilson called this a “drop in the ocean”, given there are about 90,000 vessels in the global fleet, of which about 60,000 ply international routes.

Based on the limited number of manufacturers and time constraints on facilities to install scrubbers, AlphaTanker estimates no more than 500 ships could be fitted each year. Wartsila puts the figure closer to 300.

So it would take more than 100 years to fit the global fleet.

________________________________________________________________

CAN REFINERS MEET NEW DEMAND?

The global refining industry needs to process an extra 2.5 million bpd of crude to make distillates for cleaner fuel, says Robert Herman, refining executive at Phillips 66.

Some refiners have invested in cutting sulphur in their output, but fitting hydrocracker or coker unit so that a refinery produces more distillates with lower sulphur content while reducing fuel oil output can cost about $1 billion, analysts say. Small refineries, unable to afford the upgrade, may find they are churning out fuel oil without finding buyers.

Rich Rewards Await Top Oil Refiners as Ships Make Low Sulphur Switch Fuel

A KBC consultancy survey showed 40 percent of Middle Eastern and European refineries are not prepared. European plants, which tend to be less complex than those in other regions, produce more fuel oil and may face the biggest challenge.

Morgan Stanley says refineries of Spain’s Repsol, Turkey’s Tupras, India’s Reliance and U.S. independent Valero are among the best prepared because they already produce high middle distillate and low high-sulphur fuel oil.

WHAT WILL HAPPEN TO THE CRUDE MARKET?

The simplest way for refineries to produce fuel with less sulphur is to buy and process crude that contains less sulphur, a shift that could change demand for different oil grades and lead to greater oil market volatility.

For example, processing Iraq’s Basra Heavy grade with high sulphur content produces as much as 50 percent fuel oil, while using light, sweet North Sea crude with less sulphur produces about 12 percent fuel oil.

“There will be a bidding war for sweet crude,” said Stephen George, chief economist with KBC Advanced Technologies.

This could hike the price of sweeter crudes, including several grades used to make dated Brent, the benchmark for three quarters of the world’s oil. Meanwhile, the cost of refining “sour” crudes with more sulphur, such as those from Venezuela, Mexico and Ecuador, “could be more than its value,” he said.

WHO WILL PAY THE PRICE?

Energy firms and shippers may face a squeeze on margins. But, ultimately, extra costs are likely to fall on consumers of everything from household appliances to gasoline that are shipped around the world. Roughly 90 percent of world trade is by sea.

Wood Mackenzie estimates that global shipping fuel costs are likely to rise by a quarter, or $24 billion, in 2020. Others estimate extra costs for container shipping alone will be $35 billion to $40 billion.

In addition, a surge in distillate demand by shippers could push up prices of other products, such as jet fuel and diesel.

“It’s going to make moving anything more expensive,” said AlphaTanker’s Wilson.

Example, Mexico already delayed their cleaner diesel requirement from a 2016 law.

https://www.reuters.com/article/us-mexico-diesel-regulation/mexico-to-delay-clean-diesel-rule-as-fuel-is-scarce-sources-documents-idUSKCN1P92KV

 

https://www.breakthroughfuel.com/blog/sulfur-2020-diesel-prices/

 

 

 

@ceo_energemsier Very interesting !!!

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2 hours ago, Jan van Eck said:

there is nothing "illicit" in trading in Iranian oil.  Where does "illicit" come from? Iran is under sanctions only from the US.  There is no UN Resolution of Embargo.  Europe is not part of an Embargo.  "Illicit" implies that there is some form of international sanction voted on by the civilized world.  That is not the case.  So if there is nothing illicit, who is going to ask a lot of questions about the provenance of some oil shipment?  Only the USA.  So what?  It does not get destined to the USA.  At least, not that anybody would admit to. 

What are your thoughts one the Special Purpose Vehicle? Will that be effective?

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5 hours ago, Osama said:

What are your thoughts one the Special Purpose Vehicle? Will that be effective?

Probably.

Notwithstanding the thoughts of ceo_energemsier, posted above, that major buyers of oil will reject Iranian loads as they adhere to the US sanctions as part of being in the civilized world, and thus Iranian oil will become illicit, I disagree and would say that oil is a commodity, at its core it remains a pennies industry, and profits are made in the purchase end of the oil rainbow.  The temptation to buy perfectly good oil at a discount is far too powerful to keep that oil off the market.  It becomes, therefore, just a question of "how much discount" the Iranians have to leave on the table.  And if refined into diesel  (marine gasoil), quite possibly none, especially after 2020 and the IMO Rules kick in and demand will be enormous. 

How to transact for it? Well, if the US becomes an obstacle, then some alternate path will evolve.  To think otherwise is to be naive.  Look, Mr. Trump cannot keep Iran from selling oil, there are buyers out there that want and need it, and have the checkbook to pay for it. So, it will be shipped, bought and sold.  And re-sold.  Way of the world.   

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8 hours ago, Jan van Eck said:

Sure, that technology exists.  But remember that there is no international consensus on embargoing Iranian oil.  It is all-USA.  Thus, the real question is:  so what? Is anybody really going to go "fingerprint" some oil cargo?  Or does everybody adopt the posture of innocent opacity?  

there is nothing "illicit" in trading in Iranian oil.  Where does "illicit" come from? Iran is under sanctions only from the US.  There is no UN Resolution of Embargo.  Europe is not part of an Embargo.  "Illicit" implies that there is some form of international sanction voted on by the civilized world.  That is not the case.  So if there is nothing illicit, who is going to ask a lot of questions about the provenance of some oil shipment?  Only the USA.  So what?  It does not get destined to the USA.  At least, not that anybody would admit to. 

Here's where I think purchasing Iranian oil will be a major problem for those nations who continue to participate.  1 protection 2 access to USA economy (there will be penalties if/when caught) 3 finding reliable vehicles

I think USA will actively disrupt channels and make it extremely difficult for Iran to move goods.  Iran is hostile state, #1 sponsor of terrorism.  It will not be a good investment for those nations that continue or attempt to procure from Iran. 

USA is going to keep finding replacement trading partners.  China is learning this fast! 

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21 minutes ago, BigJets said:

Iran is hostile state, #1 sponsor of terrorism.

Then again, the Russians are big on "sponsoring" terrorism, just ask the Ukrainians.   Ask the Dutch, whose nationals were on that  airplane the Russians shot down with a missile.  Yet Russian oil and gas find their way to market in huge quantities. US efforts to disrupt that did not quite work out.  Nordstream II is an example. 

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(edited)

6 hours ago, BigJets said:

Here's where I think purchasing Iranian oil will be a major problem for those nations who continue to participate.  1 protection 2 access to USA economy (there will be penalties if/when caught) 3 finding reliable vehicles

I think USA will actively disrupt channels and make it extremely difficult for Iran to move goods.  Iran is hostile state, #1 sponsor of terrorism.  It will not be a good investment for those nations that continue or attempt to procure from Iran. 

USA is going to keep finding replacement trading partners.  China is learning this fast! 

I have said that in this discussion that the facts are:

1) Japan will not buy Iranian crude

2) S. Korea will not buy Iranian crude

3) India will not buy Iranian crude

"

4/23/19 7:47 AM

India to observe US sanctions on Iranian oil

NEW DELHI — India said Tuesday it will buy crude oil from other major oil producing countries in view of the United States’ decision this week to end waivers that allowed it to buy Iranian oil without facing U.S. sanctions.

External Affairs Ministry spokesman Raveesh Kumar said the Indian government would continue to work with partner nations, including the United States, to find ways to protect India’s energy and economic security interests.

India bought 23.6 million tons of Iranian oil in the financial year ending in March 2019, said Y.K Baweja, India’s Petroleum Ministry spokesman. He did not give details of India’s plans after the U.S. waiver ends on May 2.

Iran was the third largest oil supplier for India after Iraq and Saudi Arabia. Imports account for more than 80% of India’s oil needs.

In November, the U.S. granted a six-month waiver to India and seven other countries to continue importing oil from Iran. Washington decided to eliminate all Iranian oil revenue, which it says funds destabilizing activity throughout the Middle East and beyond.

The sanctions would choke off more than $50 billion a year in Iranian income, U.S. Secretary of State Mike Pompeo said in Washington on Monday."

4) Taiwan will not buy Iranian crude

5) Greece will not buy Iranian  crude

6) Italie will not buy Iranian crude.

All these countries have major economic interests tied to the US economy, US banking and trade and even if they dont , they still dont want to upset the apple cart with trying to sneak in a few cargoes of Iranian crude on whatever discount terms when they have clear and safe alternatives.

Italy and Greece will replace Iranian barrels with Russian barrels, closer and cheaper for them and the Urals blend is suitable for their refineries and which they already use. The other countries will diversify their supply sources and they already have. India is buying more US crude to replace Iranian barrels, as have Japan, Taiwan and SK.

Iran sanctions have already cut their exports, the loss of the rest of their existing export volume will be easily offset by OPEC and non OPEC.

As far as China goes, they already are in a trade negotiation with the US, I do not think they would want to worsen the tense and volatile situation,  they have a lot at stake in a trade deal with the US. China can also easily replace Iranian barrels from Russia and Russia wont have a second thought about not selling their oil to China and take a bigger share of Iran's market share with China.

There are pipelines and rail transport in place to ship oil from Russia to China which has been ongoing for many years. If my memory serves me right , China did invest 10bil$ (or something in that range) to help build the pipeline to move crude to China from Russia (this was years ago) and in more recent years many more transport infrastructure projects have been funded and moving along in various stages completion.

AS far s US sanctions enforcement, it maybe carried out by the USN and or other nations part of the enforcement plan, including but not limited to KSA, UAE and other regional players within the AG waters. The US Treasury will be extremely vigilant in putting sanctions on "cheaters" (banks, companies , shell companies, front companies, shipping companies, individuals etc) who violate the sanctions and the treasury divisions of OFAC and FinCEN among others will be at the forefront of targeting the violators.

Banks and other types of financial services firms with any kind of exposure directly and or indirectly will be affected if they violate the sanctions under the PATRIOT ACT and various AML (anti money laundering) provisions. Foreign banks and financial services firms that have any sort of correspondent accounts and or correspondent banking relations with US banks or non US banks directly or indirectly , will be affected if they violate the sanctions. Even if a non US bank or financial firm does not have a direct relation with a US bank but a bank they transact with has a correspondent relationship with a US bank or maintains US banking relationship will become the target and that bank would not want to lose their CERTIFICATION under the PATRIOT ACT.

All said and done, yes there maybe and will be "small actors" trying to squeeze out some profits throughout this escalation of sanctions and for the time frame it may last. Just like in the previous sanctions against Iran and Iraq, people were tying to make $$$$. They used small barges, even the Dhows to ferry Iraqi and or Iranian crude or petroleum products and trans-ship and lighter onto other bigger vessels and barges. Yes and they even engaged in forging documents of origin and export, but many were caught . For some, the $$$/bbl was a good motivation.

But it wont amount to a large scale operation or amount to even a million barrels a day of Iranian oil being smuggled!!

Maybe NK will become a buyer of Iranian crude since they have some experience in violating sanctions in sneaking in a few barrels here and there of sanctioned goods.

Think UK, Germany, The Netherlands etc are going to buy Iranian oil? Think the world's major and or independent oil companies are going to buy Iranian oil? A big segment of the refining capacity in the world is owned and operated by major and independent oil companies and they are not going to risk buying Iranian crude no matter what discount is offered and getting that sanctioned oil to their respective ports of discharge is not going to be an easy task given the fact that insurance companies that not only insure the cargoes but the vessels will be keeping an eye out. Again, there maybe and will be 'small actors" willing to take the risk but not a large scale operation that would amount to Iran being able to move a million barrels a day.

 

 

Edited by ceo_energemsier
adding info

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On 4/22/2019 at 10:49 AM, BigJets said:

 

At the end of the day, you are a nation, who would you rather buy oil from?  where is your safest oil/energy investment?    USA or Russia?  USA or Libya?  USA or Venezuela?  USA or Iran? 

Canada

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On 4/23/2019 at 3:50 AM, Jan van Eck said:

It also will likely end up shutting in the crude that is the most costly to produce - likely candidate for that is, unfortunately, Canada.

I know that Candian oilsands projects take a huge initial investment but once those costs are sunk the mines (or SAGD) actually can run for a long time at a decent price per barrel. It is also energetically costly, but they are energy companies after all, so they just burn their own stuff - you know, dig out two and burn one just to upgrade and ship the other.

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20 hours ago, ceo_energemsier said:

 

There is such a thing called, crude oil finger printing which can trace the crude oil to the specific area it was produced in by using biomarkers and other specific signatures of each and every crude oil stream from around the world.

My former lab did oil fingerprinting (source matching spills) - it's far from perfect.  The "fingerprint" isn't static, weathering, off-gassing volatiles, etc. distorts things pretty quick. The GC-MS chromatograms are a big mess of poorly resolved peaks just due to the sheer number of compounds present...

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21 hours ago, Jan van Eck said:

Perhaps to no surprise, you are mis-quoting me.  Look again.  I said  "{the president] exercising his blowhard privileges."   Every President has, and has used, the presidential blowhard privileges.  It has nothing to do with "party" and nothing to do with "personality."  Hectoring, or jaw-boning, is the great advantage conferred on every President.  The President is fully entitled to harangue, hector, make a speech, to the point where the presidency is called the "bully pulpit."    You want to turn that into some "politically biased" thing, then you do both me and this Forum a dis-service.  I am neither biased for nor against Mr. Trump.  Like all Presidents, he has his issues, and I have repeatedly stated here that as to that, I simply shrug my shoulders.  He does good things, and he does lousy things.  That is the nature of the folks that run for those Offices. 

If he wants to go yell at the Iranians, then hey, he got elected, not me, so he can go right ahead.  The point I make is that there will inevitably be plenty of folks who will ignore him and figure out ways around his "sanctions," which, let us remember, are totally unilateral, and have no support from others.  As a practical matter, Mr. Trump is attempting to bend the entire planet to his personal will.  Whether or not he is successful in that remains to be seen.  Personally, I don't think he will be successful.  Europe is not behind him, and there is no UN Resolution to confer any legitimacy.  It is purely a US political move.  One thing that was well learned from George H.W. Bush (41) is the great value of consensus.  Before he had the Army take back Kuwait, he built a consensus of other nations, a number of which sent troops into the field along with the Americans and the Saudis.  In taking on Iran, he has no consensus.  The countries that are knuckling under, such as South Korea and Japan, are doing so out of fear.  In the long term, that never works. 

Since you are not happy with my English, there is nothing I can do for you. I invite you to express yourself in this column in Dutch, and let us know how you make out. I remind you English is my third language.  If you are offended by the use of "blowhard privileges," then you go suggest an alternative descriptor. And do it in French, la langue diplomatique

Your reply simply supports my original post.

 

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3 minutes ago, Douglas Buckland said:

Your reply simply supports my original post.

 

Tell you what, Doug:  You go your way, I go my way, and you are invited to ignore anything and everything I write.  What you ignore and do not read can hardly offend you. Have a nice day. 

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1 hour ago, Jan van Eck said:

Tell you what, Doug:  You go your way, I go my way, and you are invited to ignore anything and everything I write.  What you ignore and do not read can hardly offend you. Have a nice day. 

This forum needs more people like you.

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7 hours ago, Enthalpic said:

My former lab did oil fingerprinting (source matching spills) - it's far from perfect.  The "fingerprint" isn't static, weathering, off-gassing volatiles, etc. distorts things pretty quick. The GC-MS chromatograms are a big mess of poorly resolved peaks just due to the sheer number of compounds present...

Yes obviously they werent so good at it or wasnt the right tech.... but some one did and still does ...................... a very good job on id'ing key markers , bio or non  and very specific sigs

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7 hours ago, Enthalpic said:

I know that Candian oilsands projects take a huge initial investment but once those costs are sunk the mines (or SAGD) actually can run for a long time at a decent price per barrel. It is also energetically costly, but they are energy companies after all, so they just burn their own stuff - you know, dig out two and burn one just to upgrade and ship the other.

Currently burning 1/3 of all Canadian NG to produce their oil and its only destination is the USA, a saturated market and no pipelines will be built through BC in the next decade and certainly none going East.  So, if you believe the USA will increase its import of Canadian oil to mix with light sweet crude, then.... yes.  Good spot for your $$$.  Of course the market is still the rest of the world which is mainly Asia and gulf oil to Asia is the longest route possible as Panama Canal is not big enough.  Then again, neither is the Suez and they are still shipping oil around the Cape. 

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(edited)

Has Trump Given Up On Keeping Oil Prices Low?

Below are my thoughts on the on-going conditions in market---relevant to this thread as well:

https://oilprice.com/Energy/Energy-General/Has-Trump-Given-Up-On-Keeping-Oil-Prices-Low.html

"Oil prices have rallied more than 2 percent this week after the Trump Administration canceled the waivers given to major consumers of Iranian oil - including both China and India which together account for almost 50 percent of the Islamic Republic’s exports. Trump’s decision will undoubtedly have unforeseen consequences for the oil market. However, in the short term, there are two key questions that must be addressed: One, now that the United States is the largest producer of oil in the world, will Trump ignore higher oil prices and focus less of forcing Saudi Arabia to increase output? And, two, if the United States does continue to press the Saudi Kingdom to make up for lost oil exports by Iran; will Saudi Arabia acquiesce to Trump’s demands?"

Cc: @Tom Kirkman, @William Edwards, @ceo_energemsier, @Marina Schwarz, @Jan van Eck, @Enthalpic

 

Edited by Osama
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I doubt Trump will ignore higher oil prices. These are voters who are paying more to fill their tanks.

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1 minute ago, Marina Schwarz said:

I doubt Trump will ignore higher oil prices. These are voters who are paying more to fill their tanks.

Yes! And that is why I think KSA will increase production. 2020 re-election ...for Trump political capital is very important and higher oil prices can burn it down

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Not positive, but pretty sure that taking Iran's current government out of play is a fairly big, long term goal of Trump.

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