Saudis Retaliate To "Oil Freeze" Fallout: Ban Transport Of Iranian Crude In Territorial Waters

Tyler Durden's picture

At first, when it announced the terms of its "oil freeze" agreement with Russia one month ago, Saudi Arabia seemed willing to grant Iran a temporary exemption from the supply freeze, at least until it recovers its pre-embargo production levels. That however changed on Friday when the country's Deputy Crown Prince Mohammed bin Salman, shocked Saudi Arabia's Arab allies in the Persian Gulf, telling Bloomberg his country would only join the freeze curbe Iran - and all other OPEC member nations - also joined.

Following the Friday announcement, yesterday Iran's oil minister Zangadeh made it clear that the country rejects Saudi demands, and would continue ramping up production at will, in the process making the April 17 Doha meeting meaningless.

And then, in a new and unexpected retaliation by Saudi Arabia for Iran's intransigence, moments ago the FT reported that Saudi Arabia has taken steps to slow Iran’s efforts at increasing oil exports, banning vessels that transport Iranian crude from entering their waters, according to traders and shipbrokers.

More details from FT:

Iranian vessels carrying the country’s crude are restricted from entering ports in Saudi Arabia and Bahrain, according to a circular sent by a shipping insurance company to its members in February.

 

The notice said ships that have called to Iran as one of its last three ports of entry will also require approval from the Saudi and Bahraini authorities before entering their waters. Shipbrokers and traders have relayed the same messages since.

 

Iranian oil executives have expressed their concern about the message circulating in the market, saying it is only adding to problems they face in selling their crude.

 

Saudi Aramco, the state oil company, and The National Shipping Company of Saudi Arabia (Bahri) did not respond to requests for comment.

It is not clear just how much of an impact this escalation will have because as shown in the map below, Saudi territorial waters are hardly a major factor in Gulf shipping lanes.

However, considering that Iran already faces insurance, financing and legal obstacles despite the lifting of sanctions linked to its oil industry in January, and considering the amount of clout the Saudis have with financial partners, its attempt to make Iran's oil production more difficult will surely reap at least partial success.

Indeed, as the FT adds, oil tanker association Intertanko and other industry participants say no formal notice has been given by Saudi Arabia but uncertainty is making some charterers less willing to lift Iranian crude.

”It’s seen as an unknown risk,” said one shipbroker. “No one wants to disrupt their relationship with the Saudis.”

As a reminder, the amount of oil being stored at sea off the coast of Iran has risen by 10 per cent since the start of the year, data from maritime data and analytics company Windward show, and now stands at more than 50m barrels.

But what is perhaps far more troubling for Iran is that on Friday president Obama criticized Iranian leaders for undermining the “spirit” of last year’s historic nuclear agreement, even as they stick to the “letter” of the pact.

According to the Hill, in comments following the Nuclear Security Summit in Washington, Obama denied speculation that the United States would ease rules preventing dollars from being used in financial transactions with Iran, in order to boost the country’s engagement with the rest of the world.

Instead, Obama claimed, that Iran’s troubles even after the lifting of sanctions under the nuclear deal were due to its continued support of Hezbollah, ballistic missile tests and other aggressive behavior.

 

“Iran so far has followed the letter of the agreement, but the spirit of the agreement involves Iran also sending signals to the world community and businesses that it is not going to be engaging in a range of provocative actions that are going to scare businesses off,” Obama said at a press conference.

 

“When they launch ballistic missiles with slogans calling for the destruction of Israel, that makes businesses nervous.”

 

“Iran has to understand what every country in the world understands, which is businesses want to go where they feel safe, where they don’t see massive controversy, where they can be confident that transactions are going to operate normally,” he added. “And that’s an adjustment that Iran’s going to have to make as well.”

And so a new potential bullish catalyst for oil emerges: If Obama's anger grows, and if the Iran agreement is ultimately unwound, that would mean that all of the excess oil brought on market by Iran, would promptly be taken off the market once more, in the process eliminating the supply glut overnight.

It remains to be seen if Obama is ready to sacrifice his foreign "legacy" just to boost the price of oil, and thus, gas at the pump. Then again, considering over the weekend Goldman made a huge U-turn on the "low oil is good for the economy", and if Obama's advisors start whipsering in his ear how higher oil prices are critical for US energy companies, that may be precisely what ends up happening.

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Mr.Sono's picture

Yeah that will work, with no consequences what so ever

Bloppy's picture

When is ZH going to blow the lid off of this Tesla Model 3 scam? Are those "reservations" really orders? No.

PT's picture

"It's not an oil tanker.  It's my personal pleasure craft ... which just happens to have an extra extra extra long range fuel tank."

Dear Iranians and any other oil producers.  Feel free to store all your excess oil at my place.  I'll do my best to keep the price as low as possible.  First I'll need to charge a fee so I actually have a place where to store the oil.  After that, I guess I'll accept payment in refined product.

Hugs

PT

NoWayJose's picture

Fastest growing Google search -- How fast does an oil tanker have to go in order to wake board behind it?

HowdyDoody's picture

Obstruction to right of passage through territorial waters = Act of war?

 

Arnold's picture

",,,,,,,,,,oil emerges: If Obama's anger grows,"

 

 

 

Munchkin!

 

(Thanks for letting me borrow your meme for a second.ald)

JRobby's picture

WW III

Get Ballistic over it!

PT's picture

No-one knew how it started.  There were tensions everywhere ...

 

 

 

 

 

... some Arch-Duke or something got shot or something ...

Thom_333's picture

That's alot of nukes sitting off Syria...

ZenFish's picture

testing ignore 1st time user

Arnold's picture

Little chance of that.

IronForge's picture

Funny part of that scam is, that TSLA never produced more than 40K Cars in one year.

They've allegedly have a 250K "Customers" who placed their Reservations.  So, unless TSLA can ramp up their Production Lines (they are using a old NUMMI Plant, IIRC), their "Customers" may have to wait for a few more years.

Figure GM will unleash their Bolt and Volt, BMW and others will up their ante, and HMC and TM will ramp up their PHEV and HFCV Offerings.

All while Oil Px take another dive.  Que in a few Blackouts/Brownouts and a few charred SUV-Cues; and you have TSLA doomed down the line.  Once they build out more Hydrogen stations in the Major Cities, it's over.

Gregor Samsa's picture

What about the bump in oil prices when the algos and dumb money get wind of this? I imagine that's the real goal.

Freddie's picture

Iran should just bring some Yemeni/Houthi's over to help out.  Supposedly the Houthi sunk 10 Saudi Navy ships.  Some of them pretty good sized frigates.  The Houthi don't even have a navy. 

F the slimy Saudis.  How many people died in Syria and Libya and other places because of the House of Saud. 

HowdyDoody's picture

The Houthis don't have an airforce either, but Saudi/Qatari F-16s keep falling out of the sky due to 'technical malfunctions'. Come to think of it, the Houthis don't have much in the way of APCs, tanks, MLRS or howitzers, just good ole' AKs, RPGs ... and Combat Sandals.

http://america.aljazeera.com/content/ajam/articles/2015/9/7/saudi-arabia...

 

JohninMK's picture

All the indications are is that its the Houti special forces with the combat sandals.

The regular troops have combat flip-flops.

researchfix's picture

That´s the footwear of winners. Ask Vietnam.

Thom_333's picture

Why doesn't the US open up on Saudi. After all they have a loooong tradition of selling out allies. Both overt and covert. Iraq...Libya...

HedgeAccordingly's picture

Their FX Dollar reserves keep dropping, as their rhetoric keeps popping. http://hedgeaccordingly.com/2016/04/saudi-arabias-fx-reserves-drop-to-4y...

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Apr 4, 2016 8:16 AM

Bullish for oil price, supply being constrained

BorisTheBlade's picture

Let the Tanker war 2.0 commence.

krispkritter's picture

Instead of all this bloated rhetoric about, and continued demonizing of, Iran, how about we nuke the fucking Saudis and start a glass factory?  Think of all the new windows we can break to jump start the economy!!

brada1013567's picture

Oboots on the ground.

RawPawg's picture

and this is why i still stack on forward with my Silver

it ain't oil(it's a shiny PM),and all the DRAMA that goes along with it

Stack On...and Prep

These Babies are gonna start a world of hurt

Jason T's picture

I stacked my wood .. for next years heating season.  : )  

 

PT's picture

I'd quite happily "stack" oil if I could.  Can't burn gold or silver in your engine.  Gold in your pocket means you still have to walk to put fuel in your jerry can.  (Yes, yes, I know, I'll also need a refinery.)

Spent me whole life being told about expensive oil and how we were soon going to run out.  Now it is supposedly cheap and running out of our ears and I've got no money to buy and nowhere to put it all.  Damn!

Yellow Zookaninnie's picture

Stack solar panels for home energy and save the rewards to buy oil.

Haraklus's picture

"Now it is supposedly cheap and running out of our ears and I've got no money to buy and nowhere to put it all"

No money to buy it and nowhere to put it is the exact situation the world is in with oil.

roadhazard's picture

I always stay a winter ahead. Not for anything but accident or illness.

roadhazard's picture

I always stay a winter ahead. Not for anything but accident or illness.

beijing expat's picture

He might not have a choice. The Russians don't get angry they get even. By working with Iran to keep prices at rock bottom they are well on the way to bankrupting KSA. Think of what this will mean for the empire and its dominance in the region. At the same time Putin is making a lot of new friends in the region. It's easy for him because everyone knows he doesn't want to dominate. Russia's strategic interest is to have stability and peace on its borders and in its near abroad. For Putin to succeed all he has to do is talk the regional players into acting in their own interests. Talk is cheap. Americas huge military presence is not.

datura's picture

Exactly. Also, if Saudis (and USA) keep blocking Iran, this will only make Iran more dependent on Russia, but it will certainly not bring Iran down. Russia has already been taking Iranian oil and selling it as her own (the so-called oil for goods barter exchange, when Iran gives Russia oil and Iran sends Russia goods) and this helps Iran to sell more of its oil. It is obvious from this that there are other things more important for Russia than the price of oil. 

JohninMK's picture

You make a good point. Russia is selling Iranian oil out of Iran as if it were Russian since it has been bought by Russia in exchange for goods, like weapons.

So, what happens when a Russian owned or chartered tanker leaves Iran?

Is it blacklisted like a tanker containing Iranian owned oil?

Freddie's picture

The Russians are like - let's be friends.

 

The USSA is like - were from the govt and we here to help.  Americans now how that works out including places like Waco.  The other USSA approach is the zio-State Dept/Soros where vermin like Nudelman say "F**k the EU!"  

The Russians know who Nudelman is - she is just like Soros another zio-Bolshevik type who murdered 25 million Christian Russians.

Hope Copy's picture

Seems like there is a lot of Russian pipe that is laying around from projects that have not got going and the means to make a lot more...  just saying.. ["they get even."]

bid the soldiers shoot's picture

easier said than done

For Putin to succeed all he has to do is talk the regional players into acting in their own interests. 

The CIA has an annual budget of $50 billion which they spend convincing the regional players that the CIA is their own best interest.

 

Don't be surprised if several pro-Putin politicians in neutral countries lose their jobs by the Mossack Fonseca revelations.

roadhazard's picture

Like I said last week, Iran is on borrowed time and that time will end with Hitlery.

hardcleareye's picture

Wow... your getting into Robo Trader territory with all of those "junks".....lol

nathan1234's picture

Nothing to worry folks.

China will buy Iranian oil in Yuan and or Gold and at bargain prices. No need for any US$. And no need to support American allies.

Refineries can be tuned to adjust for the different specs on aalong term basis.

Saudi oil can languish on it's own. After all one cannot buy oil from countries which promote and fund terrorists, can they !

Guess the world must also decide whose oil to buy.

Freddie's picture

The hilarious part is the Saudis are going totally ape shit doing all the wrong things which causes the candle to burn at both ends:

1. Starting genocidal wars with neighbors so the Saudis are hated by many. Wars in Syria, Libya, Yemen and also in Iraq.

2. Crashing prices when global demand is down.

3. Pissing off Russia and Putin plus Iran and Hezbollah.

4. Watching their oil fields die cause they are old and shagged out.

5. Lots of PR and media stories about rich young Saudis.

6. Their close connection to another non-islamic country who their allies ISIS/ISIL/NUSRA/Al Qeada never attack.

7. Spending money domestically that they do not have.

These f***ing Saudis have created so much ill will in the Middle East.  I mean do you really want to piss off Russia, Putin, Iran and Hezbollah?   How many innocent Syrians are dead because of the Saudis, Qatar and their demonic friends?

HowdyDoody's picture

It's almost as if someone was deliberately trying to destroy them.

gallistic's picture

Steel on target, Freddie.

I thoroughly enjoyed your elegant understatement: "Their close connection to another non-islamic country who their allies ISIS/ISIL/NUSRA/Al Qeada (sic) never attack" 

I too have wondered what the fuck is really going on to make the Saudis (and Turks) commit Harakiri on the world stage.

+1

 

AmericanFUPAcabra's picture

More than just the Saudi's are to blame for Syria and Libya. The 'color revolutions' or Arab Spring as the media sold it back in 2010 didn't kick off in Syria as easy as it did in Tunisia, Egypt and Libya. The resistance that Assad's government was underestimated by all parties and it is getting harder to sell the somewhat dumbed down masses another war. The British population was not to eager to get involved with another war, especially after that sketchy false flag gas attack they tried to pin on Assad. That made it harder to get a 'coalition' together to invade Syria, so proxies had to be emoldened and the Saudi's just happened to be the ones with the visibly bloody hands, so to speak. The weapons they are using are mostly US and UK surplus, with the UK's arms sales up tenfold this year, something you left out in your blamefest, otherwise kudos.

 

-edit: a few posts down you mentioned it, hadnt gotten that far in the thread. Cheers

Sturm und Drang's picture

...“No one wants to disrupt their relationship with the Saudis.”

Quite the opposite.

innocent observer's picture
innocent observer (not verified) Apr 4, 2016 9:15 AM

the young saudi king will have his tail wag the dog oil production decimating war, long before folks realize who planted the  idea in his head.

venturen's picture

SA is becoming like a petulant children....and haven't figured out that they are almost irrelevant to the USA...and could be replaced by Canada
(3 times bigger to the USA already), Russia, Mexico, Venezuela(largest proven reserve in the world), Iran or Iraq at the drop of a hat! 

Freddie's picture

I am still trying to figure out why the USSA finally is throwing Saudis under the bus for Iran.

It is all NSA confessions of an economic hit man - I think.  Saudis did endless deals with GE, all the defense contractors, chemical companies and many others in USA mega corps.  Ten billion dollar deals with General electric and others were pretty common with the Saudis.

I think the USSA/NSA know the Saudi oil fields are rapidly dying so the pivot is not to Iran.

The NSA/mega USSA corps want to do business with Iran and became Iran's oil has been on ice for 30+ years.  And don't for a second believe that was not by design. 30 + years of f**King American and European consumers with higher than normal oil prices by taking Iran's supply off line with the embargoes.

Thom_333's picture

Because it's in their nature. Just to keep propping up the destabilization circus. Why take out Iraq...? Just because we can. Saudi is a piece of cake. Their ranks are filled with obese and lazy mercs out of Pakistan and such places.

Just think about the shale oil revenues when oil hits 250 USD/bbl.

Let that king Salmon try to prove he hasn't got any weapons of mass destruction. Just worse for him if he doesn't. He then has to get some and publicly destroy them. Will be  a huge problem for him to prove a negative...