Bloomberg: Iran faces a difficult task in searching for new buyers for its oil economy

Bloomberg reported that the US administration’s decision to grant a temporary exemption for the export of Iranian oil for two months gives Tehran the ability to put millions of barrels of oil on the market, but the task of reaching new buyers for its oil after a long period of sanctions will not be easy.

US Treasury Secretary Scott Besent said on Monday that his department had issued a temporary general license for a period of 60 days authorizing the production, supply and sale of Iranian oil, as part of implementing the terms of the memorandum of understanding signed last week between Washington and Tehran to end the war between the two sides.

The US Department of the Treasury explained that the general license for Iran, which allows the production, delivery and sale of crude oil and petrochemical and petroleum products of Iranian origin, will continue until August 21.

Bloomberg added that exempting Iranian oil from US sanctions may mean that there are competitors to China, which is the largest buyer of this oil, to buy shares of it, but there are many complications ahead of Tehran if it wishes to expand the circle of countries purchasing its oil.

European sanctions continue

Among the most prominent of these complications, according to Bloomberg, are the continued sanctions imposed by the European Union and the United Kingdom on importing oil from Iran, and the difficulty of obtaining the necessary insurance to transport Iranian oil, or at least the high cost of insurance if it is agreed upon.

Also, some ports may not allow what is known as the Iranian “shadow fleet,” which transported oil despite years of US sanctions on Tehran, to enter them.

Bloomberg added that there are fears among some oil buyers about the volatility in the policy of US President Donald Trump, and the possibility of retracting the temporary exemption of Iranian oil from US sanctions, which may cause problems for refineries that may contract to buy it.

Supply and demand problems

Bloomberg explained that, in addition to all the problems facing the process of selling Iranian oil, the supply and demand side is not currently in Tehran’s favor, with buyers having multiple options.

Tehran currently has about 68 million barrels of oil stored at sea on ships, due to oil facilities being damaged during the war, and it is competing for buyers in the oil market with what other countries are offering, including Russia and the United States, in addition to Middle Eastern countries whose oil exports have begun to recover.

As for China, the traditional buyer of Iranian oil, the US exemption may motivate Chinese government refineries to buy more oil, but refining rates in Chinese private sector refineries, which consume the bulk of Iranian oil, are at their lowest levels in 9 years, according to Bloomberg.

There are expectations that India may buy some Iranian shipments, provided that they are at reduced prices, given its proximity to the Gulf region, which allows oil to reach it quickly. South Korea may also be among the buyers of Iranian oil.

Increased oil tanker traffic

In this context, Reuters reported that tankers linked to Iran continued to cross the Strait of Hormuz, with transit traffic rebounding on Monday in light of the progress of talks between the United States and Iran.

Flows had declined before the talks amid threats from Trump to resume the war and Tehran’s announcement that it had closed the strait again.

The first round of talks ended on Monday, a day after its launch, with both parties agreeing on a road map to reach a permanent agreement within 60 days.

According to Reuters, analysts expect the exit of more crude oil shipments that have been disrupted in the Gulf since the outbreak of the war, with the increasing entry of sanctioned tankers through the strait to load and export Iranian oil, after the United States suspended the sanctions.

In this context, Oli Hvalby, an analyst at SEB Research, told Reuters that Venezuelan, Russian, and now Iranian crude oil is available to anyone who wants to buy, indicating that countries will seek to store crude oil to replenish their stocks.

He added that easing sanctions would not have a significant impact on prices in the short term, given that the memorandum of understanding between the United States and Iran is still new and fragile.