As Iranian oil is cheaper than that from other countries, the suspension will increase the distributors' costs and could lead to higher gasoline prices in Japan.
Oil prices rallied on Tuesday to hit the highest level in nearly two months after the evacuation of two Anadarko (NYSE:APC) platforms in the Gulf of Mexico amid a looming tropical storm.
Benchmark Brent crude was up 1.33 percent at $79.20 a barrel.
A set of USA sanctions targeting Iran's oil industry is due to take effect in November. "So we are looking at both sides of this discussion", Mohammed bin Hamad Al Rumhy told CNBC's Hadley Gamble Monday. Japan's Fuji Oil Co. has effectively stopped buying crude from the Persian Gulf state because it's becoming hard to secure a ship to transport oil, according to a company spokesman.
"We still have two months to go before November 4 and we expect to see further decreases in shipments to OECD Asia, Europe and India", said Michael Tran, analyst at RBC Capital Markets, adding he anticipates Iran deepening discounts for its crude to find buyers. Even though Libya's recovery boosts OPEC's combined oil output, the country remains an unreliable supplier as civil strife continues to disrupt its petroleum industry.
India's move follows China, which too continues buying Iranian crude, relying on vessels owned by National Iranian Tanker Co (NITC).
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SCI had a contract until August to import Iranian oil for Mangalore Refinery and Petrochemicals Ltd (MRPL), two sources familiar with the matter said.
"With the anticipation of up to 1.5 million barrels per day affected by the U.S. sanctions on Iran, one would expect prices to move higher in the weeks ahead".
French bank BNP Paribas struck a similar tone, warning of "supply issues" for the rest of the year and into 2019.
Though the sanctions are officially taking in November, Iran is already seeing customers flee as the US imposes penalties on buyers after President Donald Trump backed out of a 2015 nuclear accord with the country, Bloomberg reported.
"Crude oil export losses from Iran due to U.S. sanctions, production decline in Venezuela and episodic outages in Libya are unlikely to be offset entirely by corresponding rises in Opec+ production", Tchilinguirian said, referring the Organisation of the Petroleum Exporting Countries and countries including Russian Federation that reached a deal to curb output to counter low prices.
The average retail price for a liter of regular has been above ¥150 since late May.