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James Smith, Developed Markets Economist at ING, notes that Oil markets tightness has stemmed from falling Iranian flows, with the latest ship tracking data continuing to show exports trending lower.

Key Quotes

“Data from Bloomberg shows that shipments in September fell to 1.6MMbbls/d, down from 1.83MMbbls/d in the previous month, and almost 900Mbbls/d lower than the highs seen in April. These large declines have occurred even before sanctions come into force on 4 November, so this does suggest that there is further downside post November.”

“While it is widely accepted that the EU will likely fall away altogether as a buyer of Iranian crude oil, there is still plenty of uncertainty around China and India.”

“India is the second largest buyer of Iranian crude oil, importing around 580Mbbls/d so far in 2018, which is equivalent to around 28% of total Iranian crude oil exports.”

“Meanwhile China, the largest buyer of Iranian crude oil has also seen reduced imports over the past couple of months- flows fell from a record 806Mbbls/d in July, to just 500Mbbls/d in September- the lowest level since January.”

“However, the ability to track Iranian shipments accurately is a growing issue, and this will only increase as we move closer towards the official start of sanctions.”