Iran will lower the price of its crude for Asian clients, who are its biggest buyers, Iran reported, citing a source from the country’s oil ministry who wished to remain unnamed. The source said, “The discount is part of the nature of the global markets being offered by all oil exporters.” Yet for Iran right now, the discount is also an attempt to hold onto its biggest market as U.S. sanctions kick in.
The source confirms a Friday report by Reuters, which said the National Iranian Oil Company had reduced oil prices for Asian clients by between US$0.75 and US$0.90 a barrel, with prices for Western clients down by US$0.50 a barrel.
Iran’s Deputy Petroleum Minister for International Affairs had said earlier Saudi Arabia used the discount tactic to curb Iran’s international market share, but even so, the average amount of crude oil that Iran shipped abroad between late March and late July was 2.3 million barrels, IRNA notes. Now, the country is employing the discount tactic targeting mostly its top oil buyers: China and India.
China is particularly important for Tehran. “If China . . . buys Iran’s oil, we can resist the U.S., one Iranian analyst told the Financial Times last month. “China is the only country which can tell the US off.”
For now, there seems to be no danger of China suspending Iranian oil imports. Beijing has repeatedly asserted it will continue buying Iranian crude. The latest assurance came from the head of international operations at the China Petroleum and Chemical Industry Federation. Beijing did make one concession to Washington, however, when it agreed to keep its Iranian oil imports at current levels. Yet this may change as the trade war between the two heats up, analysts believe.
Meanwhile, the market is preparing for a supply squeeze of up to 1 million bpd as a result of the U.S. sanctions that could push crude prices a lot closer to US$100 than they are now.