ADNOC, the UAE’s Abu Dhabi National Oil Co., for the first time since May 2011 will supply full contractual crude oil volumes to Asia in March, according to industry sources.
This move is initiated to help the region’s top buyers cut their dependence on oil from sanctions-hit Iran.
Asia consumes more than half of Iran’s exports of 2.6 million barrels per day (bpd) but China, India and Japan-its three biggest customers-are under pressure to seek crude from other suppliers as sanctions undermine sales from OPEC’s second-largest producer.
Some of Iran’s Asian customers have already started buying less crude. Media reports said Japan’s biggest refiner, JX Nippon Oil and Energy Corp, will cut imports by about 10,000 barrels per day (bpd) from April, mirroring reductions by smaller Cosmo Oil started in January. Japan’s oil imports have been declining for years as consumers move to cleaner-burning natural gas.
The United States tightened its financial sanctions on Iran, which also faces an embargo on its oil exports from the European Union effective July 1. Tehran has warned it may cut supplies to Europe soon, and repeatedly threatened to block the Strait of Hormuz, a vital shipping lane for oil supplies. The sanctions against Iran aim to force it to abandon a suspected nuclear weapons program, but Tehran says the program is meant to develop energy, not weapons. China, the world’s second largest oil consumer, has slashed purchases from Iran for the first quarter of this year, although the reduction is not sanctions-related but stems from a dispute over contract terms and as Beijing seeks to negotiate lower prices.
China is the top buyer of Iranian oil, taking around 20 percent of Tehran’s total exports, but since January it has cut purchases by around 285,000 barrels per day (bpd), or just over half of the total daily amount it imported in 2011. China is now scouring the world for alternative oil supplies, and has been drawing heavily on Saudi Arabia in addition to importing more cargoes from West Africa, Russia and Australia. Iran’s oil trade with second-biggest crude customer India has also been fraught with problems in the past 13 months after a clearing mechanism was scrapped. India will make 45 percent of the payment for its oil from Iran in rupees, in the latest attempt to sort out the dispute. Tehran will use that money to pay for imports from the country.