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The Latest on Trump’s Move to End Iran Waivers

Rachel Adams-Heard and Stephen Cunningham
The Latest on Trump’s Move to End Iran Waivers

(Bloomberg) -- Some of the biggest beneficiaries of sanctions aimed at crippling Iran are oil companies on the other side of the world.

Drillers based in places like Texas, Oklahoma and California added billions of dollars in market value on Monday after the Trump administration announced it’ll no longer give nations like China and Italy a pass on sanctions barring purchases of Iranian crude. Brent futures jumped to the highest in almost six months as the end of waivers for some of the world’s biggest economies was anticipated during Asian trading hours.

Buyers whose waivers expire within weeks -- China, India, Japan, South Korea, Italy, Greece, Turkey and Taiwan -- now face the prospect of having to find alternative supplies. What that means for the agreement to curb output by the Organization of Petroleum Exporting Countries and allies including Russia remains to be seen. South Korea said it will push for its exemption until the May 2 deadline.

We’re tracking reaction and commentary here:

U.S. Wants to Push Iran Oil Exports to ‘Zero’ (1:22 p.m.)

The U.S. wants to completely shut down Iranian oil exports.

“This is the right time and we have been consistent on going to zero,” Assistant Secretary of State Francis Fannon said during a conference call.

Closing of Hormuz Unacceptable to U.S. (12:52 p.m. in New York)

A senior Trump administration official involved in the discussions on Iran oil waivers said there would be absolutely no justification for the Islamic Republic to close the Strait of Hormuz. The U.S. would find a shut down of the key Persian Gulf chokepoint unacceptable, the official said.

Turkey Rejects Unilateral Sanctions, Minister Says (10:58 a.m.)

Turkish Foreign Minister Mevlut Cavusoglu said the American escalation won’t serve “regional peace and stability.”

“We don’t accept unilateral sanctions and impositions on how we will maintain ties with our neighbors,” Cavusoglu told state-run Anadolu Agency.

South Korea to Keep Pushing for Waiver (10:39 a.m.)

South Korea will continue to push for its stance on a waiver to import Iranian oil until the extension deadline of May 2, South Korea’s foreign ministry said. The country has been in talks with the U.S. for an extension and will continue to make efforts until the deadline.

Saudis Pledge to Help Ensure Supply (9:11 a.m.)

Saudi Arabia will coordinate with fellow oil producers to ensure adequate supplies are available to consumers, while ensuring global oil market “does not go out of balance,” Energy Minister Khalid Al-Falih said in a statement.

The Kingdom is closely monitoring oil market developments and will consult closely with other producers and consumers in next few weeks to ensure a well-balanced and stable market, he said.

Pompeo ‘Confident’ in Stable Market (8:52 a.m.)

Saudi Arabia and the United Arab Emirates will ensure an “appropriate supply” of oil, along with the U.S., as President Trump won’t re-issue Iran oil waivers set to expire on May 2, Secretary of State Mike Pompeo told reporters at a briefing.

“Each of those suppliers are working directly with Iran’s former customers,” Pompeo said as he announced a “full stop,” with no waivers beyond the expiration date. He said in a tweet that “we’re confident” the oil market will remain stable.

Trump Won’t Re-Issue Waivers (8:26 a.m.)

U.S. President Donald Trump will not re-issue Iran oil waivers when they expire in May, according to a White House statement, confirming reports that pushed oil up in Asia trading. The U.S., Saudi Arabia, the U.A.E. and allies are “committed to ensuring that global oil markets remain adequately supplied,” the statement said. Brent crude traded just below $74 a barrel after touching the highest intraday level since November earlier in the session.

Threat to Close Hormuz (7:52 a.m.)

Iran will close the Strait of Hormuz, a waterway that is vital for global oil shipments, if the country is prevented from using it, a senior military official said Monday. “If we are prevented from using it, we will close it,” the state-run Fars news agency reported, citing Alireza Tangsiri, head of the Revolutionary Guard Corps navy force. The Strait of Hormuz carries a fifth of the world’s traded oil that Iranian officials have threatened to block in retaliation for sanctions targeting the country’s nuclear program.

Beijing Objects (3:44 p.m. in Singapore time here and below)

China’s reaction is always the subject of much speculation but for now Beijing is just reiterating its opposition to unilateral sanctions, accusing the U.S. of reaching beyond its jurisdiction. “China’s cooperation with Iran is open, transparent, reasonable and legitimate, and should be respected,” Foreign Ministry spokesman Geng Shuang said in response to a question on the waivers at a regular briefing in Beijing. China, Iran’s biggest oil buyer, will safeguard the interests of its domestic enterprises and is willing to play an active and constructive role in the energy stability of the international market, he said.

HPCL Has Options (2:34 p.m.)

A sanguine response from another Indian refiner, Hindustan Petroleum Corp. The company has a well diversified oil basket and there won’t be any supply constraints if Iranian supplies are halted, chairman M.K. Surana says. The refiner has already reduced purchases and has limited exposure to U.S. sanctions, he says.

IOC Says It’s Prepared (1:44 p.m.)

Another Asian buyer says it has been preparing for the possibility of waivers not being extended. State-run Indian Oil Corp., the country’s biggest buyer of Iranian crude, says it has built in optional volumes in its term contracts with Kuwait, Abu Dhabi, Saudi Arabia and Mexico, that can be drawn to make up for a shortfall from the Islamic Republic. The company has been lining up alternative supplies since last year, according to a company official.

Brent Blowout (12:01 p.m.)

Brent crude is seeing a bigger reaction than WTI, with the spread between the two benchmarks widening to $8.25 a barrel, the most since the end of March. London-based Brent is considered more of an international marker than the New York contract, which probably explains the outsize move.

Japan to Keep Talking (10:43 a.m.)

Japan, the fourth-biggest Asian buyer of Iran’s crude loading in March, isn’t saying much yet other than that it’ll continue talking to the U.S. to avoid sustaining any damage from the Iran decision, according to Chief Cabinet Secretary Yoshihide Suga. Tokyo has been in “close contact” with Washington, he says, begging the question whether it knew that this decision was on the cards or not.

Korean Buyer Looks Elsewhere (10:12 a.m.)

Some initial reaction from South Korean buyer Hanwha Total Petrochemical Co., which purchases Iran’s South Pars condensate. The company had already been buying and testing alternative cargoes from areas such as Africa and Australia as the May 2 expiry of the waivers approached, according to a spokesman. It’s not impossible to find alternative shipments, the spokesman said on Monday, but it’s going to push up costs.

It’s worth noting that buyers were seen to have already stopped purchasing from Iran amid uncertainty over whether the U.S. would renew the waivers or not.

Oil Busts Through Resistance Level (09:57 a.m.)

They took a while to get going, but oil prices are now reacting aggressively to the news. Brent’s jumped as much as 3.3 percent to $74.31 a barrel in London, the highest intraday price since Nov. 1, and WTI by 2.9 percent in New York. Trading was closed on Friday for the Good Friday holiday.

Brent has busted through a key resistance level, the 61.8 percent Fibonacci retracement level of $72.68 a barrel. The Fibonacci sequence is a technical indicator widely looked at by traders, based on a 13th century Italian mathematician’s theories about the reproduction rate of rabbits.

--With assistance from Sharon Cho, Emi Nobuhiro, Debjit Chakraborty, Serene Cheong, Heesu Lee, Jessica Summers and Glen Carey.

To contact the reporters on this story: Rachel Adams-Heard in Houston at radamsheard@bloomberg.net;Stephen Cunningham in Washington at scunningha10@bloomberg.net

To contact the editors responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net, Carlos Caminada, Christine Buurma

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