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CERAWeek: US waivers for Iran oil imports may hinge on Venezuela sanctions impact: State official

Houston — The US could extend waivers from sanctions on Iranian crude and product purchases if current sanctions on Venezuela significantly impact global oil supply and prices, Brian Hook, the US State Department's special representative for Iran signaled Wednesday.

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Hook's comments, made at CERAWeek by IHS Markit, were the first public indication that the Trump administration was open to extending the Iran sanctions waivers, and seemed to be a softening of Hook's previous public stance that the waivers would likely expire in May as part of the US goal to push Iran crude exports to zero.

Still, Hook said the decision on waivers will be made by President Trump, who is closely watching oil prices.

"He has made it very clear that we need to have a campaign of maximum economic pressure ... but he also doesn't want to shock oil markets, he wants to ensure a well-supplied and stable oil market," Hook said. "When you have a better-supplied oil market it enables us to accelerate our path to zero, but we also know that there are a lot of variables that go into a well-supplied and stable oil market."

Hook pointed to US Energy Information Administration projections that global oil supply will outweigh demand in 2019, indicating that a removal of US waivers on Iranian imports could be done without dramatically impacting the market.

"We are very happy, given our goal is to get to zero imports [of Iranian crude] as quickly as possible; we are very happy to see projections that supply will exceed demand," he said. "It's very helpful and we hope that that continues because it just makes it a lot easier."

Still, he said several variables, including US sanctions on PDVSA, which have helped push Venezuelan oil production below 1 million b/d, could change that.

"We are aware that our diplomatic and economic pressure, the timing and the pace of that affects Venezuela's oil industry and were just very mindful of making sure that we are looking around the world, across Libya, across Venezuela, Iran, we've got oil flowing in Kirkuk, working with the Saudis ... we want to ensure that we are doing this in a responsible way," Hook said.

When the US reimposed sanctions on Iranian crude in November, it also issued waivers to Iran's top oil buyers, allowing them to continue their imports, while agreeing to some cuts.

The waivers, known as "significant reduction exemptions" and issued to India, China, Italy, Greece, Japan, South Korea, Taiwan and Turkey, are set to expire in early May. Hook declined to comment to reporters Wednesday if a potential extension of those sanctions would be announced publicly before they are set to expire in May.

Hook also declined to comment on whether the US was in discussions with all recipients of those waivers for extensions.

He said US sanctions have taken roughly 1 million b/d of Iranian crude off the global market, a deficit he said was countered by increases in US and Saudi output.

Hook said plans for Iran import waivers would be balanced with ongoing Venezuela sanctions, as the US worked towards maintaining a "well-supplied and stable oil market."

On January 28, the US unveiled sweeping sanctions on PDVSA, setting an immediate ban on US exports of diluent to Venezuela and requiring payments made to PDVSA to be through blocked accounts, setting up a de facto ban on US imports of Venezuela crude.

S&P Global Platts Analytics forecasts that US sanctions will cause Venezuelan crude output, which averaged 1.2 million b/d in January, to fall to 825,000 b/d in the fourth quarter of this year and then fall further to average 750,000 b/d in 2020.

-- Brian Scheid, brian.scheid@spglobal.com

-- Edited by Jennifer Pedrick, newsdesk@spglobal.com