Refiners cutting back on Iran oil purchases
EUROPEAN refiners are winding down oil purchases from Iran, closing the door on a fifth of the Opec member’s crude exports after the United States imposed sanctions on Teheran, company and trading sources said.
Although European governments have not followed Washington by creating new sanctions, banks, insurers and shippers are gradually severing ties with Iran under pressure from the US restrictions, making trade with Teheran complicated and risky.
On May 4, US President Donald Trump announced his decision to quit a landmark 2015 nuclear deal between Iran and world powers and reimposed sanctions on Teheran.
The sanctions on Iran’s petroleum sector will take effect after a 180-day wind-down period ending on November 4.
“We cannot defy the United States,” a senior source at Italy’s Saras, which operates the 300 000-barrels-a-day Sarroch refinery in Sardinia, said.
Saras was determining how best to halt its purchasing of Iranian oil within the permitted 180 days, the source said.
“It is not clear yet what the US administration can do, but in practice we can get into trouble,” he said.
A drop in crude trading between Iran and Europe could comfifth plicate efforts by the European signatories of the nuclear deal – France, Germany and Britain – to salvage the agreement.
Refiners including France’s Total, Italy’s Eni and Saras, Spain’s Repsol and Cepsa as well as Greece’s Hellenic Petroleum were preparing to halt purchases of Iranian oil once sanctions bit, the sources said.
These refiners account for most of Europe’s purchases of Iranian crude, which represent about a of the country’s oil exports.
Iran’s crude sales to foreign buyers averaged around 2.5 million barrels a day in recent months, according to data collected by Reuters and EU statistics office Eurostat.
The bulk of the exports go to Asia.
The companies, most of which have long-term contracts with Iran’s national oil company, would continue to purchase cargoes until the sanctions took effect, the sources said.
Total, Europe’s largest refiner, does not intend to request a waiver to continue crude oil trading with Iran after November 4, according to people with direct knowledge of the matter.
That effectively means it will be unable to keep buying crude.
Eni said it had a supply contract outstanding for the purchase of two million barrels a month, expiring at the end of the year.
Repsol and Hellenic Petroleum declined to comment.
“Our trading activity [remains] business as usual.
“We continue to strictly conform with European Union and international laws and regulations,” a Cepsa spokesman said.
Iranian crude could be substituted by Russian Ural grades, the prices of which have risen following the US announcement, as well as crude from Saudi Arabia, trading sources said.
Some of the refiners, including Cepsa, are considering whether to request a waiver from US authorities to continue buying beyond the November deadline to complete their term agreements.