Oil industry analysts estimate that Iran sold about 1.5 million barrels a day on world markets in October, even as it braced for sanctions to take full effect on Sunday.
"This is an above and beyond expected result," said Iman Nasseri, managing director for the Middle East at Facts Global Energy. "The Trump administration wanted to see zero out of Iran in November. We never believed that's a realistic outcome."
Companies and governments were given six months to wind down their energy-related trade since sanctions were announced in May following President Donald Trump's decision to withdraw from the Iranian nuclear deal.
A senior US State Department official said in June that no exceptions would be made and countries that don't cut their purchases to zero may be punished. Trump threatened "severe consequences" in August for those who continue to trade with Iran.
While many buyers in Europe and Asia have complied with the US demands, China, India and Turkey — among others -— are still taking large volumes of Iranian oil.
"The likelihood that Iranian exports drop to zero is very low, mostly because of China," said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
"China has rejected the US request to stop importing Iranian oil, and also has ways to circumvent US financial sanctions," he added.
Iranian oil production and exports peaked at 3.8 million and 2.4 million barrels a day, respectively, in the second quarter of this year, according to data from OPEC and the International Energy Agency. That means exports have already fallen by about 900,000 barrels per day.
But fear of a supply crunch in global markets has turned into talk of a surplus as Saudi Arabia leads an effort by OPEC and Russia to pump more barrels to make up for the anticipated shortfall in Iranian supply.
With Iranian oil still flowing, Saudi Arabia may now need to think about cutting production, rather than increasing it.
US crude oil futures dropped by nearly 11% in October to trade around $65 per barrel, while the global benchmark, Brent crude, fell by more than 8%.
A government source in Saudi Arabia said the kingdom has ramped up production to 10.7 million barrels a day, from 10.5 million barrels in September. Now it's concerned about excess supply because of the limited impact of the US sanctions, the source added.
Waiver for India?
Bloomberg News reported on Thursday that the United States has agreed to let eight countries — including Japan, India and South Korea — keep buying Iranian oil in reduced quantities to avoid driving up oil prices. Citing a senior administration official, the news agency said Secretary of State Mike Pompeo would announce details on Friday.
"We have no official confirmation of this from the US government," Sunjay Sudhir, joint secretary at India's Ministry of Petroleum told CNN Business.
Analysts said India, China and Turkey would likely be on the list of countries allowed to legalize their purchases.
"Any waivers for the buyers of Iranian crude will most likely go to these," said Nasseri of Facts Global Energy .
Even if the waivers happen, global oil supplies could get tighter again early next year.
The International Energy Agency has said that this round of sanctions "could be more substantial" than in 2012, when Iranian exports were cut by 1.2 million barrels a day.
Facts Global Energy estimates that Iranian exports will stabilize in the first half of 2019 at 800,000 barrels per day.
Rystad Energy said exports could even drop to 600,000 barrels per day in the most "severe case" if only China continues to import at its pre-sanctions level.
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