Shell to stop Iran crude buys ahead of EU embargo

SINGAPORE -(MarketWatch)- European oil major Royal Dutch Shell PLC will stop buying crude oil from Iran ahead of July 1, when a European Union embargo of Iranian oil takes effect, a company spokesman said Friday.

The spokesman confirmed a Reuters report that quoted Shell Chief Executive Officer Peter Voser, who was speaking in Houston.

"We are complying with the sanctions. They do recognize previous commitments and contracts," Voser said in the report, adding that old contracts will be fulfilled and shipments delivered "within a matter of weeks."

Though expected, the development signals that Tehran may lose at least some of its customers well before July 1 because some annual term contracts expire at the end of March. While European buyers are unlikely to renew their term deals, Asian refiners in countries such as Japan and South Korea are also under Western pressure to reduce term volumes when they renew their contracts.

Sanctions are affecting Iran's oil exports more quickly than many expected, largely because many shipping companies are finding it increasingly difficult to insure vessels calling at Iranian ports, a U.S. State Department official said Wednesday.

The Shell spokesperson didn't say how much crude oil Shell buys from Iran. Traders said it wasn't clear if Shell's move would affect joint venture Showa Shell Sekiyu K.K. (5002.TO), Japan's largest buyer of Iranian crude at 100,000 barrels a day.

"I'm not sure if Showa Shell will also cut" oil purchases from Iran, a Japanese trader said.

Japan, one of the largest buyers of Iranian crude, is in final-stage talks with the U.S. on cutting its imports of Iranian crude oil, Japan's foreign minister said Wednesday. Japanese officials are seeking an exemption from U.S. sanctions on Iran, saying they will damage the Japanese economy.

Following new sanctions imposed by the U.S. weeks earlier, the European Union in January approved an oil embargo against Tehran that takes effect July 1. The moves are aimed at choking off Iran's key oil revenue in an effort to force it to halt its nuclear program.