Western sanctions tighten squeeze on Iran oil exports
With crude prices trading around 10-month highs and limited spare production capacity worldwide, the United States may offer Iran's biggest customers waivers from the oil sanctions, which take effect June 28.
Iran is the world's fifth largest oil exporter and the second-biggest producer in OPEC after Saudi Arabia.
It's biggest customers, including China, Japan and India have become tangled up in U.S.-led sanctions aimed at curbing Iran's nuclear ambitions, but which have also revived fears of a global recession.
High crude prices present a major challenge for politicians seeking re-election, including for U.S. President Barack Obama, who may face a backlash from voters paying a U.S. gasoline price that is climbing towards record levels of $4 a gallon.
Obama, however, can grant waivers if doing so would be deemed in the nation's interest.
"With oil inventories and spare OPEC production capacity running low, consumers don't have much buffer against additional disruptions in supply," said Trevor Houser, a partner at Rhodium Group and a former State Department adviser.
"That means the needle the administration has to thread to pressure Iran without raising oil prices has gotten even smaller."
The Energy Information Administration (EIA), an independent arm of the U.S. Department of Energy, said on Wednesday that Western insurers were declining to cover the trade risk on some Iranian oil shipments.
On June 28, Washington will slap sanctions on foreign banks facilitating Iran's oil trade, making doing business with Tehran all the more difficult.
On Wednesday, news emerged that the U.S. government recently forced Dubai-based Noor Islamic Bank to stop channeling Iranian oil money, cutting off another of Iran's links to the international banking system.
The world's biggest electronic bank clearing system, SWIFT, is also preparing to block Iran's central bank from using its network to transfer funds.
In a sign of Iran's difficulties, traders said Tehran was trying to sell about 200,000 tonnes of crude oil from a supertanker floating off Singapore.
They also said a vessel heading towards China was carrying more oil than the usual term-contract supplies.