The Iranian oil market twist

Source:bne IntelliNews

Iranian Light crude is trading at a $1 premium to the benchmark Brent price since the US waived a sanctions-ban on buying Iran crude already at sea to ease prices on the international market.

The increase in price rising above Brent is its first positive differential since May 2022 and a reversal from early 2026, when Iranian barrels traded at a discount of roughly $10 a barrel, Argus media reports.

The price strength follows a decision by the United States on March 20 to temporarily waive certain sanctions on Iranian oil exports, allowing a limited increase in trade flows. India has reportedly bought a lot of that oil.

Since the closing of the Strait of Hormuz oil deliveries have become increasingly scarce, especially in Asia that relied heavily on Gulf exports. Iran is currently the only major Gulf oil exporter able to move crude through the Strait of Hormuz without significant interruption, while shipments from Saudi Arabia, Kuwait and others remain effectively bottled up.

Russia’s Urals blend is also trading at a premium to Brent erasing the pre-war discounts of up to $20 per barrel compared to Brent. At the time of writing, Urals was trading at $123 per barrel against Brent’s $110. Russia is now one of the few major oil exporters that operates entirely independently from the Strait of Hormuz chokepoint.

The Iran light blend is especially attractive as it is very similar to the Saudi light blend that most refineries in Asia are geared to process. The Russian blends are heavier and more sulphurous meaning refineries have to adapt their processing to cope with the more technically difficult make-up of the oil. The US was also forced to suspend sanctions on Russian oil to ensure adequate supplies to the market.

Both Russia and Iran are expected to double the amount they earn from oil exports due to the spike in prices and the reopening of the international markets to their oil. Iran is expecting a $14bn windfall from the temporary relaxation of sanctions on 140mn barrels of Iranian oil that is currently sitting at sea, The New York Times (NYT) reports.

Treasury Secretary Scott Bessent, who announced the Iran exemption, described the move as an act of martial artistry.

“In essence, we are jiujitsuing the Iranians,” Bessent said on NBC’s “Meet the Press” program following the announcement. “We are using their own oil against them.” He argued that freeing up Iranian oil will lower global crude prices and buy the US more time to topple the Iranian government.