Even before the landmark 2015 Iran nuclear deal, the world's second-biggest economy has been procuring heavy volumes of polyethylene (PE) and methanol, as well as crude, from Iran. "Even if only 200-300 kb/d of Iran exports are at risk by year-end, OPEC is not likely to preempt this loss, only react to it", Goldman said as reported by Zero Hedge.
Oil prices gained on Wednesday, shaking off the effects of a strengthening dollar, after an inventory report showed US crude and gasoline stocks fell more than expected.
Payment terms do not pose a problem as settlement of Chinese transactions with Iran are limited to telegraphic transfer (TT), cash or euro credit, although some restrictions were introduced in 2017 on the use of letters of credits (LCs) on Iranian transactions.
Das said that government would need to worry more about the impact of rising crude prices on fiscal deficit and jobs than its effect on inflation.
In some cases, to go around the sanctions, some Iranian cargoes had to be re-routed to the UAE before heading to China, resulting in higher shipping cost, she said. According to the analysts' estimates, global crude oil output would need to grow by 5.7 million barrels a day by 2020 to meet the surge in demand for distillates.
Heading towards the weekend, market focus was also on the resumption of talks between the U.S. and China on resolving a tariff spat that has seen each side threaten duties on billions of dollars of goods and which some fear could spark a damaging trade war.
Continuing trades with Iran could potentially sour relations between China and the U.S., which has been embracing increasingly protectionist trade policies under President Donald Trump.
In less than two years, new regulations from the International Maritime Organization, created to curb air pollution, are to come into force.
In a televised speech, Trump announced the exit, adding he would not sign the waiver of nuke-related sanctions against Iran.
Iranian Oil Minister Bijan Namdar Zanganeh has said that if Total pulls out, its share of the project-slightly over half -will be handed to the Chinese firm.
World oil prices have surged more than 70% over the a year ago as demand has risen sharply while production has been restricted by the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, and other producers, including Russian Federation. Saudi Arabia and Russian Federation might be able to release more barrels to balance a shortage from Iranian distributors, but it seems likely that prices will continue to rise on the expectation of diminished supply.
Iranian oil "is not irreplaceable" to China, which could import more from Russian Federation and Saudi Arabia, said the economist Hu.
U.S. West Texas Intermediate (WTI) crude futures were down 15 cents at $71.34 after also hitting their highest since November 2014, at $72.30 a barrel.
The upward pressure intensified following the US' decision to withdraw from the Iran deal.
Brent crude futures LCOc1 reached an intraday high of $80.18. And the Russell 2000's out-performance of the wider market suggested this, he said. This (rising crude prices) is not a good development.
Read: Which GCC country just struck oil? This may well have been the case in past decades, where a spike in the price of crude oil would be directly linked with some sort of spike in consumption levels and as such a spike in industrial production.