Oil dips as IMF lowers global growth outlook; eyes on US hurricane

10 October, 2018, 08:52 | Author: Brooke Harris
  • India buying Iran oil in defiance of Trump sanctions

India's oil and natural gas minister, Dharmendra Pradhan, confirmed Monday that two Indian oil companies would be buying Iranian crude in November.

Reuters said that Indian Oil would buy six million barrels of oil and Mangalore Refinery and Petrochemicals three million barrels.

Making this projection in an interview with Reuters at the World Bank Conference in London, he stated that so long as US sanctions take effect on Iran in November, "I do not expect the price to close less than $80 this year".

"India is continuing with its relationship with both its key energy partners Iran and the United States", a second source said.

US Secretary of State Mike Pompeo last month said that on November 4th the sanctions against Iran will be enforced and that the US will consider waivers for countries that bring their Iranian oil purchases down to zero. Zanganeh said such remarks had no "real impact on the market" but were part of a psychological war against Iran, Reuters reports. "Any country that makes such claims... just wants to display its support to the U.S. sanctions against Iran", Zanganeh said.

On Monday, crude oil prices fell early in the session in response to a report that Saudi Arabia stands ready to replace all of the oil lost because of the sanctions.

"Our goal remains to get to zero oil imports from Iran as quickly as possible, ideally by November 4", when the full spectrum of sanctions are re-imposed on Iran.

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Iran accounts for 10% of India's crude oil imports, making it the second largest importer of Iranian oil behind China.

This would be a hugely controversial move as it would bypass the U.S. sanctions as nearly all world oil is traded using the dollar. Brent hit a four-year high of $86.74 last week.

In its World Economic Outlook released late on October 8, the International Monetary Fund said Iran's oil-driven economy is expected to shrink by 1.5 percent this year as a result of declining oil exports, with the drop in economic output accelerating to 3.6 percent in 2019.

The escalating US-China trade war, and weakening currencies in major Asian oil importers such as India are all expected to cap rising oil prices as global economic and oil demand growth could suffer if Brent crude breaks above the $85-$90 band. Even in the case of Iran there is an expectation that its oil exports may fall less sharply than feared, while Libya's oil production has stated to rise.

The cost of the Indian basket of crude rose to $84.14 a barrel on 5 October, according to the Petroleum Planning and Analysis Cell. It added that the effective reversal of fuel price deregulation would also constrain future private sector investments in the sector.

"The basic point is that they are all government companies", Mr. Pradhan said.

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