Iran's exports of oil to China, Europe and other countries will decline later this year and into 2019 if the United States can enforce President Donald Trump's decision to reimpose the "highest level" of economic sanctions targeting oil trade with Iran.
Refining company sources say Asia's petroleum refiners have shifted purchases to other exporters in preparation for the renewal of US sanctions against OPEC member Iran, which currently exports about 2.5 million barrels of oil a day, with China, India and other Asian nations the primary customers.
Trump on Tuesday announced the withdrawal from the Iran deal, which was struck between major world powers and the Middle Eastern nation in 2015, and the renewal of sanctions to the "highest level" on Tehran.
"We're expecting it to dissuade some buyers from purchasing Iranian crude," Bob McNally, president of consultancy Rapidan Energy Group in Washington, said.
The deal had limited Iran's nuclear ambitions in exchange for removing joint US-Europe sanctions against it.
Iran now produces about 3.8 million barrels per day (bpd), accounting for about 4 per cent of world supply. Any decline in shipments would not be immediate, as sanctions would not come into effect for 180 days.
Earlier US Treasury Secretary Steven Mnuchin said he didn't expect renewed sanctions would increase oil prices as some countries are willing to increase output to offset any Iran production losses.
US allies in Europe on Tuesday said they were looking to find ways to preserve what was left of the agreement.
But European and Asian importers may soon find themselves faced with the choice of doing business with the United States or Iran.
"We think everyone is going to scramble to call the White House and get an exemption," McNally said.
Currently, the biggest buyer of Iran's crude is China, whose imports peaked at about 900,000 bpd in mid-2016 but have dropped to around 600,000 bpd in 2018, according to Thomson Reuters ship tracking data.
