US sanctions have failed so far to shut down Iranian oil exports, and eight countries have been granted temporary exemptions to allow them to buy from Tehran without fear of punishment even after the deadline to halt all purchases has passed.
Oil industry analysts estimate that Iran sold about 1.5 million barrels a day on world markets in October, even as it braced for the sanctions to take full effect starting Monday.
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"This is an above and beyond expected result," said Iman Nasseri, managing director for the Middle East at Facts Global Energy. "The Trump administration wanted to see zero out of Iran in November. We never believed that's a realistic outcome."
Companies and governments were given six months to wind down their energy-related trade when sanctions were announced in May following President Donald Trump's decision to withdraw from the Iranian nuclear deal.
A senior US State Department official said in June that no exceptions would be made and countries that don't cut their purchases to zero may be punished. Trump threatened "severe consequences" in August for those who continue to trade with Iran.
But on Monday, US Secretary of State Mike Pompeo said that eight jurisdictions would get temporary exemptions to the sanctions: China, India, Italy, Greece, Japan, South Korea, Taiwan and Turkey.
They have already shown "significant reductions" in their imports of Iranian crude, according to Pompeo. He added that two of the eight "have completely ended imports of Iranian crude" and that the US government will continue negotiations to "get the rest to zero."
While many buyers in Europe and Asia have complied with the US demands, China, India and Turkey — among others — are still taking large volumes of Iranian oil.
"The likelihood that Iranian exports drop to zero is very low, mostly because of China," said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
"China has rejected the US request to stop importing Iranian oil, and also has ways to circumvent US financial sanctions," he added.
Talk of an oil surplus
Iranian oil production and exports peaked at 3.8 million and 2.4 million barrels a day, respectively, in the second quarter of this year, according to data from OPEC and the International Energy Agency. That means exports have already fallen by about 900,000 barrels per day.
But fear of a supply crunch in global markets has turned into talk of a surplus as Saudi Arabia leads an effort by OPEC and Russia to pump more barrels to make up for the anticipated shortfall in Iranian supply.
With Iranian oil still flowing, Saudi Arabia may now need to think about cutting production, rather than increasing it.
US crude oil futures dropped by nearly 11% in October to trade around $65 per barrel, while the global benchmark, Brent crude, fell by more than 8%.
A government source in Saudi Arabia said the kingdom has ramped up production to 10.7 million barrels a day, from 10.5 million barrels in September. Now it's concerned about excess supply because of the limited impact of the US sanctions, the source added.
Despite the waivers, global oil supplies could get tighter again early next year.
The International Energy Agency has said that this round of sanctions "could be more substantial" than in 2012, when Iranian exports were cut by 1.2 million barrels a day.
Facts Global Energy estimates that Iranian exports will stabilize in the first half of 2019 at 800,000 barrels per day.
Rystad Energy said exports could even drop to 600,000 barrels per day in the most "severe case" if only China continues to import at its pre-sanctions level.