Singapore — The US believes the world has enough oil to keep the market stable, and Washington will step up efforts to work with producers and Asian importers to ensure a smooth energy transition away from Iranian oil, US government officials said Thursday.
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"As we look ahead at the impact on the oil and energy markets, we have been very careful and deliberate on how we go about this to ensure market stability. And over the last couple of days, I think we have seen that borne out, that energy markets will remain stable," said Brian Hook, US Special Representative for Iran and Senior Policy Adviser to the Secretary of State, in a telephonic press briefing which he and Bureau of Energy Resources assistant secretary Francis Fannon jointly hosted.
The White House announced Monday that the US would end all waivers from Iran oil sanctions when they expire May 2, a decision that drew an immediate threat from Iran to close the Strait of Hormuz and pushed up crude futures to six-month highs.
Replying to a question on whether there would be any possibility of further extensions to waivers on Iranian oil, Hook said "the idea of extension -- that door is closed."
"The only reason we granted waivers back in November is because we faced a different oil market then. It was a tight and fragile oil market and if we had not granted those waivers, we then would have possibly seen a significant price spike. We are now in a position where [we] can end these waivers," he added.
WORKING WITH ASIAN BUYERS
Hook and Fannon said they were working with Asian buyers to ensure a smooth transition away from Iranian oil.
"We have been working very closely with countries like India to ensure that there is no interruption in their supplies," Hook added. "We anticipate and we are confident China will be able to make a very smooth transition to meet their energy needs and maintain access to the global financial system and to the American financial system."
Chinese official statements earlier this week indicated the possibility of a pushback from the Chinese government. Beijing has made representations to the US about ending waivers and its impact on energy markets, China's Foreign Ministry spokesman Geng Shuang told a press conference in Beijing Tuesday.
The spokesman reiterated that China was opposed to the US' implementation of unilateral sanctions and the so-called "long-arm jurisdictions" imposed by the US.
Chinese refiners have been importing between 400,000 b/d and 700,000 b/d of Iranian crude, comprising a mix of medium and heavy grades. Chinese state-run refiners have been waiting for further instructions from the government on Iranian crude.
Replying to a question on whether China's equity oil ventures in Iran will be subject to sanctions, Hook said, "We don't have an announcement on that."
Chinese state-owned oil companies are involved with a few equity oil ventures in Iran, such as CNPC in North Azadegan and South Azadegan, while Sinopec has a project in Yadavaran.
Meanwhile in India, state-run refiners said earlier this week they would be aiming to step up crude imports from countries such as Mexico and Iraq to make up for any supply losses. Indian petroleum minister Dharmendra Pradhan has said India had a robust plan to adequately supply crude to domestic refineries.
Iranian oil exports averaged more than 1.7 million b/d in March, with more than 357,000 b/d sent to India, according to Platts trade flow software cFlow and shipping sources.
OTHER OPTIONS AVAILABLE
US officials said they were also working with South Korea to find alternative supplies to Iranian condensates.
"The issue of condensates -- we are well aware of it. We are working very collaboratively with South Korea. I am very confident they will be able to find the right products," one official said, and added that the US was in talks with South Korea on issues such as quality.
Traders have said the decision to end waivers would not only have an impact on the crude market, but is also expected to have implications on the condensate market by tightening the supply pool.
South Korea had resumed crude imports from Iran in January after a four-month hiatus after fully suspending crude imports from the Persian Gulf producer in September last year due to the reimposition of US sanctions.
About 70% of Iranian crude brought into South Korea typically consisted of South Pars condensate, and more than half of the condensate which the Asian buyer imports had been from Iran.
Meanwhile, replying to a question on whether Washington would consider a grace period in the event Japan is not able to reach zero Iranian imports by May 2, one of the US officials said, "Japan is a sophisticated economy and has demonstrated remarkable resilience in being able to innovate and integrate other crude slates."
"We are confident they will maintain the collaborative dialogue and they will make the necessary adjustment as they have been doing."
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