Since negotiation between Iran and 6 powers has not reached agreement last week, scheduled European Union sanction is likely to start in July.
The sanction will halt Iranian oil imports by EU member nations. Insurance or reinsurance on tanker carrying Iranian crude provided by European based insurance companies will be also prohibited.
Although Iranian crude imports by EU were above 600,000 barrels per day in late 2011, the volume declined to about 420,000 bpd in March this year. EU's Iranian crude oil import was estimated at about 350,000 bpd in April and further decrease are expected. Therefore, the embargo by EU is unlikely to affect on the market significantly.
Meanwhile, ban on marine insurance seems to reduce Iranian crude oil demand globally. Iran maintains more than 2 million bpd of crude oil exports toward mainly Asian nations such as India and China.
Japan was the biggest buyer of Iranian crude oil previously, but the country's Iranian crude oil imports from Iran in the first quarter 2012 decreased 22% on year to 320,000 bpd. South Korea has also reduced Iranian crude oil imports in line with western sanction.
India and China are not so cooperative to the western sanction like Japan or Korea, but China had cut Iranian crude oil imports during January and February due to the conflicts on price negotiation.
China imported 550,000 bpd of Iranian crude in 2011 but its average in Q1 2012 was only 260,000 bpd. Although April amount rebounded to 390,000 bpd, it was still 24% below the previous year level.
India has been the biggest consumer of Iranian crude oil since the beginning of this year. It's Q1 imports rose 23% on year to 430,000 bpd.
Marine insurance on most of Indian crude oil imports are provided by European firms.
Asian countries could keep transporting Iranian crude oil by using sovereign insurance. But only Japan is preparing the government insurance to cover for tanker transportation at this stage. Although China and India were reported to consider the government insurance, no concrete measure has been decided in those countries.
If China and India will continue steady imports by using the sovereign insurance, Iran is likely to keep 1.8 million bpd or more crude oil exports after July. But the volume may decline sharply due to the absence of insurance.