Can we believe recovery of Iranian oil exports?

Recently, crude oil exports from Iran are reported to rebound. Is it meaning a change of situation?

Iran's crude oil exports have decreased significantly since July when sanctions by the European Union were invoked. The sanctions inhibit European nations to import Iranian crude oil and do not allow European insurance companies to underwrite marine insurance for tankers that carry Iranian crude oil toward any regions. Therefore, Iran's crude oil export was estimated to decline below the 1 million barrels per day level in July from above 2 million bpd level.

However, some alternatives against insurance by European companies are said to re-activate Iranian crude oil export.

Japan and India have decided to set the sovereign insurance for tankers to import Iranian crude oil. Although Japan's Iranian crude oil imports recorded zero in July, it seems to resume in August.

South Korea, which ceased to buy Iranian crude oil in July, also resumed purchase in September. The country uses insurance provided by Iran.
Marine insurance provided by Iran seems to recall some buyers who were worry about the risk on uninsured transportation.

On the other hand, It is expected that financial sanctions by the United States to deter buyers expansion of Iranian crude oil imports.
The U.S. has decided to sanction against financial institutes of countries that trade with Iran. But the sanction can be exempted for 6 month if the country reduce crude oil imports from Iran significantly.

Japan was approved the first exemption in March and another 6 months extension was given in September.
Meanwhile, China and India won the first exemption in June and another 6 months extension could be decided by the end of December.
It is unclear whether the U.S. will give these nations another exemption or not if they resume large Iranian oil imports.

About China, there is an another concern whether the country needs further Iranian oil or not.
China imported average 560,000 bpd of Iranian crude oil in 2011. But the numbers declined to about 350,000 bpd in the first quarter this year due to conflict over price negotiation.

Although the nation's Iranian oil imports rebounded to 520,000 bpd in the second quarter, decreased again to 460,000 bpd in July and 370,000 bpd in August. The August figure fell 22% from a year ago.

The decline in the third quarter was not only affected by the insurance problem, but also was caused by the sluggish demand.
China's total crude oil imports in August decreased 12.5% on year to 4.35 million bpd. It was the lowest level since October 2010.

China's accumulated crude oil imports during the first eight months in 2012 rose 7.4% from a year ago to 180 million tonnes. However, China has completed construction of 80 million barrels of national petroleum reserve facilities in early this year and started filling.

If the stockpile oil is deducted from total imports, net crude oil imports by China rose by only 0.7% on year in the Jan-Aug period. The real import number is match with the fact that the growth rate of crude oil processing during January and August stayed at 1.6% on year and the domestic crude oil production in the same period fell 0.4% from a year ago.

Then, recent economic data suggest that the growth of Chinese crude oil demand is likely to shrink further. China seems not necessary to buy more Iranian crude oil in spite of the risk of suffering financial sanctions.

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