India defies USA, buying Iranian oil despite sanctions

The US has been imposing new sanctions on Iran's oil industry after it withdrew from the Iran-US nuclear deal.

At the same time, United States crude oil stocks are on the rise. The Trump administration is considering waivers on sanctions, a USA government official said on Friday.

Oil prices steadied on Wednesday after the International Monetary Fund lowered its global economic growth forecasts, but markets were supported as Hurricane Michael closed almost 40 percent of U.S. Gulf of Mexico oil output and U.S. sanctions restricted Iranian exports. This would signal an attempt to bypass USA sanctions on Iranian transactions using the dollar - the dominant currency in global oil trade.

Iran, OPEC's third-largest producer, exported 1.1 million barrels per day (bpd) of crude in that seven-day period, Refinitiv Eikon data showed.

Iran's crude exports fell further in the first week of October as buyers sought alternatives ahead of USA sanctions that take effect on November 4, according to tanker data and an industry source.

Pradhan said he had urged Saudi Arabia's oil minister to keep in mind the interests of oil consuming countries when it came to higher prices.

"Such exaggerations might please Mr Trump, but the market will never believe them", Bijan Namdar Zanganeh said, according to the oil ministry's SHANA news site.

New Delhi and Tehran have reportedly discussed reverting to rupee trade after November 4. The global benchmark hit a four-year high of $86.74 last week but slipped as low as $82.66 on Monday.

"This time round, because there is so much less of a consensus on the sanctions from other countries, there will be even more of a push to obtain exceptions or find ways to walk around the sanctions".

"India is continuing with its relationship with both its key energy partners Iran and the U.S.", a second source said.

"These officials are planning to announce that it's OK to give banks waivers because re-imposed sanctions on businesses are sufficient", the source explained.

In the previous round of USA sanctions on Iran from 2012 to 2015, India continued to purchase Iran's oil although it was forced to dramatically reduce its purchases to protect its wider exposure to the us financial system.

Meanwhile, the oil imports have pushed the value of rupee downwards.

Given their dependence on Iranian oil supplies, the Indian refiners are concerned about the loss of Iranian crude once the sanctions start and are seeking exemptions.

Besides blocking of banking channels from November, the absence of payment mechanism may pose a challenge to the transportation of the oil as Iranian crude is bought on a CIF basis and shipped on Iranian tankers.