Contradictory reports continue confounding the crude markets. The overall impact of the US led sanctions on Iran and its crude exports are far from clear. Where are the markets headed to, depends largely on how deep the sanctions bite Iran. There is definite impact - none can deny. Iranian exports are lower than normal. However, what is being debated is the quantum of the impact. And interestingly, the sanctions regime has not led to any upswing in gasoline prices at the next-door gas station - no mean an achievement - signifying success of the US led strategy. Obama could have hardly afforded a sanctions related spike in gas prices, in an election year. And he has succeeded in ensuring it. Round 1 to Obama and allies. How many rounds this bout would continue is far from clear -yet. The US-led sanctions against Iran are costing OPEC's third-largest producer $133 million a day in lost sales, some report underline. Shipments from Iran have plunged by 1.2 million barrels a day, or 52 percent, since the sanctions banning the purchase, transport, financing and insuring of Iranian crude began July 1, Bloomberg reported. Annualized, that would cost Tehran about $48 billion in revenue, equivalent to 10 percent of its economy. Iran is exporting 1.1 million barrels a day of oil, according to the median estimate of 10 analysts compiled by Bloomberg, down from an average of 2.3 million in 2011. Daily output fell 9.5 percent in July to 2.86 million barrels, the lowest level since February 1990, Bloomberg said, pushing Iran to third position among OPEC's biggest producers, after holding the No 2 spot since May 2000. In the meantime, US has tightened the sanctions further, last week against foreign banks that help Iran sell its oil, targeting banks that handle transactions for Iranian oil or handle large transactions from the National Iranian Oil Company (NIOC) or Naftiran Intertrade Company (NICO), the two key players in Iran's oil trade. Obama's new order also targets China's Bank of Kunlun and Iraq's Elaf Islamic Bank for providing services to Iranian banks. Providing insurance cover to crude shipments from Iran is emerging as a major bottleneck in for Tehran. And, interestingly, major Iranian buyers are working overtime to overcome the impediment. In June, Japan's parliament passed a bill to provide $7.6 billion of sovereign insurance to tanker owners that carry Iranian oil. The Japanese government also inked deals with two domestic shipping companies to provide insurance cover for the country's two super tankers, which are to transfer a total of three million barrels of Iranian crude by the end July. In 2011, nine percent of its oil came from Iran. Importers in China and South Korea are also seeking alternative covers or have relied on Iran's fleet after International Group members, who follow EU law, stopped covering shipments. And the results are evident. Japan's crude oil imports from Iran have gone up by more than 60 percent in June. Customs-cleared imports from Iran increased to 170,389 barrels per day in June, compared to 106,162 barrels per day in May. Iran is also attempting to revive demand for its oil in Turkey, its biggest European customer. Turkey's Iranian crude oil imports stopped falling in June, according to official data. Turkey's sole refiner and crude oil buyer Tupras imported 683,596 tons or 167,025 bpd of Iranian crude in June, compared with 161,298 bpd in May, official trade data showed last week. Turkey imported an average of 180,000 barrels per day of Iranian crude in 2011. In order to give a fillip to its oil sales to Turkey, Iranian oil minister was in Ankara last week, meeting top officials. And in the meantime, India, the third-biggest buyer of Iranian oil, is to offer state-backed insurance to tankers, helping the nation's biggest sea carrier to resume cargoes from Iran. Shipping Corp. of India will soon start services to Iran as Indian insurers have agreed to give as much as $100 million of cover per voyage. Prior to the sanctions, European companies provided unlimited protection against risks including oil spills and collisions, he said. The resumption of services will help Mangalore Refinery & Petrochemicals Ltd. (MRPL), India's biggest buyer of Iranian crude, and other state processors secure supplies. Mangalore Refinery had to halt purchases from Iran after the sanctions made it impossible to get ships to carry the crude. On the other hand, South Africa which has strategic investments in Iran too, cut all crude oil imports from Iran in June, a monthly government report indicated, as US Secretary of State Hillary Clinton was about to reach on an official visit. However, it remains unclear whether the dip was permanent? In January too, South Africa did not receive any crude oil from Iran before ramping back up its imports in February. And only last month South Africa's Energy Minister Dipuo Peters underlined the nation was working with Iran to ensure it could continue importing crude oil from Iran. And on the other hand, the dip in Iranian output has been more than balanced by other producers. There seems no pressure from supply side. Major Asian refiners have been successful in replacing Iranian crude with other crudes. Russia, Saudi Arabia, and Venezuela are reportedly now exporting about 21 percent more crude to Asia's biggest buyers compared to a year ago. In the first half of the year, Saudi Arabia boosted sales to the top four Asian buyers by 15 percent year-on-year to 3.8 million barrels per day (bpd). During the same period, Venezuela's year-on-year exports also jumped 42 percent to 596,000 bpd, followed by a 36 percent year-on-year increase in shipments from Russia to 682,000 bpd. Volumes from Angola have risen 24 percent year-on-year in the first six months to 994,000 bpd and 26 percent from Kuwait to 938,000 bpd. The 17 percent fall in purchases by South Korea from Iran was filled up by Saudi Arabia, Kuwait and Qatar. Saudi Arabia is already on track to surpass its record oil output this year, apparently in line to exceed the highest level of sustained output of 9.901 million barrels a day registered in 1980, when the country opened the taps to make up for a sharp fall in Iranian output after its 1979 revolution. The battle is thus on; the energy chessboard remains spread out; moves and countermoves are being made - and the outcome far from clear yet - despite the first round victory to Washington.
