Barclays: Iran Could Find Other Buyers For Its Oil If Sanctions Tighten

Iran could do a lot of different things to kind of skirt possible tighter sanctions on its oil sector, such as sending oil to different places, Michael Cohen, head of energy commodities research at Barclays, told Bloomberg on Monday.

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“There’s a lot of different things that Iran can do to kind of skirt sanctions. In the past, they’ve used more oil in their power sector, they’ve actually sent oil to different places that can take it,” Cohen told ‘Bloomberg Daybreak: Americas’.

Commenting on last week’s oil price rally that diverged from a general slump in equities, Cohen said that at the end of last week that oil prices were supported by EIA’s Wednesday inventory report that reported a decline in crude oil inventories of 2.6 million barrels for the week to March 16, and the appointment of John Bolton, an Iran hawk and a proponent of war, as National Security Advisor.

With Bolton’s appointment, market participants are looking at pretty much an end to the Iranian nuclear deal as of May 12, Barclays’ Cohen said today.

“I think that the market pretty much assumes that there’s going to be some kind of reduction in Iranian supply,” he said, but added: “I’m not so sure that that’s the case.”

There is some wiggle room and Iran could send oil to other places, according to Cohen.

Asked about if Saudi Arabia could increase its oil production in the event of reduced Iranian supply, Cohen said that “there is some wiggle room at least in terms of other OPEC suppliers, but they are all committed to this OPEC deal and I don’t expect them to diverge from that either.”

While OPEC is expected to continue to stick to its production cut agreement with Russia, at least for now, analysts believe that the geopolitical risk premium in oil prices has definitely returned, and the month of May could be important for oil prices, because of the deadline for the Iranian deal on May 12 and elections on May 20 in Venezuela, whose oil production is in freefall.

“Even if it’s just additional sanctions on Iran, that could hurt investment in the country and reduce flows of their oil. The market would really miss their oil this time around because of Venezuela,” John Kilduff at Again Capital told CNBC last week.

“If they go forward with those elections, we could see much more coercive economic policies toward Venezuela. That’s when the oil market might start paying attention,” Helima Croft, global head of commodity strategy at RBC, told CNBC.