Market Insider

State Dept official says it will work with countries to reduce Iranian oil purchases to zero, clarifying earlier comments

Key Points
  • The State Department, which earlier this week said it expected zero Iranian oil on the market in November, now said it will work with countries that are importers.
  • A State Department spokesman's comments were construed by the market Tuesday to mean that there would be no waivers for buyers, and that sent crude prices spiking
State Department prepared to work with countries on Iran oil imports
State Department prepared to work with countries on Iran oil imports

A State Department official Thursday clarified comments from earlier this week about the U.S. government's expectations that there would be zero imports of Iranian oil by Nov. 4.

The comments, which also suggested there could be no waivers for customers of oil, sent crude prices sharply higher as the market weighed the prospect of more than 2 million barrels a day being removed from the world market.

"Our focus is to work with those countries importing Iranian crude oil to get as many of them as possible down to zero by Nov. 4," the official said Thursday. "We are prepared to work with countries that are reducing their imports on a case-by-case basis. We are serious about our efforts to pressure Iran to change its threatening behavior."

Analysts had been expecting about 500,000 barrels per day to be removed from the market, but some were adjusting those figures after the comments showed the U.S. would be more aggressive in removing Iranian oil.

The biggest importers of Iranian crude are China and India.

Earlier Thursday, news wires reported that India's Oil Ministry asked refiners to prepare for a "drastic reduction or zero" imports from Iran starting in November.

Helima Croft, global head of commodities research at RBC Capital Markets, has been expecting 700,000 barrels of Iranian crude to be removed from the market by the end of the year. She said the comments Thursday show the U.S. intends to be aggressive, and companies have already been reacting.

"If you have any U.S. exposure, you're not going to risk it," she said.

Oil prices came off their highs after Thursday's report. West Texas Intermediate was up 1.2 percent at $73.62 per barrel.

During the Obama administration, 1.2 million barrels a day of Iranian oil were removed from the market over a period of time, and analysts had expected less this time since the U.S. is going it alone on the sanctions.

Croft said it could be that cumulatively more oil could be removed from the market than last time.

President Donald Trump withdrew from the Iran nuclear agreement because he said the deal appeared one-sided and Iran could eventually restart its nuclear program. Other countries who were party to the accord have not dropped out.