Amid trade war tension, Beijing could look to undermine Washington's foreign policy stance by ignoring U.S. sanctions placed on Iran.
Bank of America Merrill Lynch warns the oil price could slip sharply if China buys Iranian oil.
"While we retain our $60 a barrel Brent forecast for next year, we admit that a Chinese decision to reinitiate Iran crude purchases could send oil prices into a tailspin," a BofA Merrill Lynch Global Research report said Friday, warning that prices could sink by as much as $20-30 a barrel in that scenario.threatened to slap a 10% tariff on $300 billion dollars of Chinese goods. The decision Thursday floored oil markets and sent crude plunging 8% — the most in four years.
"This decision would both undermine US foreign policy and cushion the negative terms-of-trade effects on the Chinese economy of rising US tariffs," the report added.Shipments of Iranian oil fell below 550,000 b/d in June from about 875,000 b/d in May and about 2.5 million b/d in June 2018, according to data from. Roughly half of Iran's exports were shipped to China in June and July, according to the firm.
"Iran would welcome any opportunity to increase its production whether or not it breaches the terms of the U.S. sanctions, but the strategy there would introduce China to a partner over which it doesn't have an enormous amount of control," Edward Bell, Director of Commodities Research at Emirates NBD told CNBC's "Capital Connection."
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