Letters of credit (L/Cs) for Iranian crude for European deliveries are becoming harder to secure, oil traders have told energy information provider Platts.

The increased difficulty obtaining L/Cs is largely a result of banks not entering new deals that would be affected by US sanctions on the Islamic Republic that are due to kick in later this year.

Mounting challenges

Traders are facing mounting challenges. As well as L/Cs, oil traders are also finding it harder to obtain insurance for shipments from Iran.

Fewer L/Cs are also expected for Iranian crude as European refiners increasingly source alternatives to oil shipped from Iran ahead of US sanctions.

Uncertainty"We continue to see a lot of uncertainty on the ability of lifters to find banks, ships and insurance for it," one crude oil trader active in the European market told Platts."At the end, some players have managed but there is a lot of uncertainty, [it is] not going to be on an automatic basis, one ship at a time, depending on exposure and, [this] will drag on," he added.But some buyers will stay in the market as long as possible for fear of alienating Iranian supply partners by sourcing alternative shipments of crude before US sanctions hit.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.