Trump may hit Iranian oil exports already dented by Israel risk

As Iran's oil exports sharply declined in October amid Israeli threats to its oil facilities, Donald Trump’s US election victory signals the potential for stricter sanctions enforcement next year.

Following Iran's ballistic missile strikes on Israel on October 1, and the likelihood of Israeli retaliatory strikes on Iranian oil facilities, especially the Kharg oil terminal, Iran’s oil loadings sharply declined.

Arman Azizian, a senior analyst at the energy consulting firm Vortexa, told Iran International that Iran's loadings of crude and biproducts dropped to 1.5 million barrels per day in October, with most of this decline occurring in the first half of the month.

Homayoun Falakshahi, a senior analyst at the commodity data intelligence firm, Kpler, told Iran International that Iran's loadings fell from 1.826 mb/d in September to 1.473 mb/d last month, marking a daily decline of around 350,000 barrels, which equates to a loss of $800 million in oil export value during the month.

In 2018, then President Trump withdrew from the JCPOA (Joint Comprehensive Plan of Action), leading to a rapid drop in Iran’s oil exports—from 2.5 million barrels per day (mb/d) to just 350,000 barrels within two years. As a result, Iran’s oil revenue in 2020 fell to less than one-tenth of its 2017 levels.

With the Biden administration’s lenient approach, Iran’s daily oil exports saw a significant increase each year, peaking at a record 1.85 mb/d in September of this year, the highest level in five years.

China is the main buyer of Iranian crude oil, having imported an average of over 1.5 million barrels per day from Iran in the first ten months of this year, accounting for 94% of Iran's total oil exports. During the same period, Iran also sent around 46,000 barrels per day to Syria and about 20,000 barrels to Brunei and unknown destinations.

Trump’s Return

Donald Trump’s return to the White House might endanger the Iranian government’s daily crude oil export target of 1.85 million barrels in next year’s budget—250,000 barrels more than Iran’s average oil exports this year and 550,000 barrels more than last year.

With Trump’s return, Iran’s oil exports are not expected to plummet suddenly to 2020 levels (350,000 barrels per day). However, the growth will certainly not continue and will likely experience a gradual decline.

Iran’s oil buyers in China are mostly small, independent refineries, which might resist US pressure for a while. Ultimately, however, given the $575 billion annual trade between China and the US, it seems unlikely that Beijing will withstand demands for a significant reduction in Iranian oil imports.

Moreover, Iran’s expanded ability to export more oil to China due to weak US sanctions enforcement since 2021 has led to a reduction in the discount it offers Chinese refineries—from $13 in 2023 to under $4 in recent months. However, a tougher US approach under the upcoming administration could prompt Chinese refineries to cut their Iranian oil purchases and demand larger discounts to continue buying.

Additionally, almost all Iranian oil exports to China are facilitated through intermediaries in Iraq, Oman, and especially Malaysia, incurring significant costs for Iran to evade sanctions. With Trump poised to enforce stricter measures, these intermediary costs are expected to increase substantially.