The U.S. State Department has terminated waivers for relief from sanctions against Iranian oil exports with effect from May 3. As outlined in Panjiva’s research of Dec. 10 these were being used by several countries – including China, India, Japan, Turkey and South Korea – to continue purchases while supply chain realignments could be carried out.

It remains to be seen whether the alternative, euro-denominated payment mechanism that has been put in place will still allow buyers to avoid U.S. sanctions will remain effective. Iranian crude accounted for 13.5% of imports into India in the 12 months to Nov. 30 and are led by Mangalore Refining and Indian Oil.

Chart segments Indian imports of crude oil in the 12 months to Nov. 30 by consignee and origin, denominated in dollars.  Source: Panjiva

Crude oil prices increased by around 3% following the waiver announcement and have followed a 50.8% surge in prices since their December lows, S&P Global Market Intelligence data shows. There will likely be a knock-on effect to supply chains more broadly via the cost of bunker fuel, which has risen by 3.3% since the beginning of March compared to a 6.6% rise in crude oil prices according to S&P Global Platts data.

Chart compares global bunker fuel prices to U.S. crude oil prices. Calculations include S&P Global Market Intelligence and S&P Global Platts data.  Source: Panjiva

The rise in oil prices clashes with President Donald Trump’s attempts to keep oil prices down, and may explain meetings held with Middle East leaders to boost oil supplies on top of ongoing attempts to improve the United States’ energy independence. The latter is gaining traction, as shown by an 80.8% year over year jump in oil exports in February, Panjiva data shows, to reach a new record of 83.7 mboe for the month.

At the same time U.S. imports declined by 8.5% yet the U.S. was still a net importer of oil given exports were just 56.5% of imports. The reduction in imports was most significant among shipments from Mexico, which fell 29.3%, and those from outside Mexico and Canada which dropped 14.8%.

Chart segments U.S. imports of crude oil by origin, compared to U.S. oil exports.  Source: Panjiva

U.S. crude oil importers will face increasing competition for supplies from countries that would previously buy from Iran. Leading U.S. seaborne importers of crude oil from outside Canada and Mexico that face such challenges include Valero, which represented 12.6% of total imports in the 12 months to Mar. 31 and saw a 28.3% year over year drop in imports in March. Others include ExxonMobil, which accounted for 7.8%, and Chevron with 6.4%.

Chart segments U.S. seaborne imports of crude oil from outside North America by consignee on a monthly and three-month average basis.  Source: Panjiva