The United States is likely to extend waivers from sanctions on Iranian oil imports in May but will reduce the number of countries receiving them to placate top buyers China and India and to decrease the chance of higher oil prices, analysts said.

Washington surprised oil markets after granting waivers to eight Iranian oil buyers when the sanctions on oil imports started in November. Benchmark Brent crude futures fell 22 per cent that month and the waivers influenced the Organisation of the Petroleum Exporting Countries' (OPEC) decision to agree in December to supply cuts starting in 2019.

Reducing the number of waivers will limit oil exports from Iran, the fourth-largest producer in OPEC, but the United States is unlikely to meet its earlier target of driving Iranian oil exports to zero.

China, India, Japan, South Korea and Turkey are likely to be given waivers after they expire in May that could cap Iran's crude oil exports at about 1.1 million barrels per day, US-based analysts at Eurasia Group said on Thursday. That would remove Italy, Greece and Taiwan from the current waivers list.

“Other geopolitical priorities will moderate the administrations desire to halt Iranian exports, particularly with Iran's top two purchasers, China and India,” the analysts said. “The reductions will probably hit the Iranian economy hard especially because President Hassan Rouhani's administration is planning its budget around unrealistically high expectations for oil revenue.”

Asia's Iranian crude imports fell to their lowest in more than five years in November when US sanctions took effect. China and India continued to import Iranian oil from November while Turkey resumed imports in December.

South Korea is expected to receive condensate from Iran this month after a four-month halt while Japan's shipments are still pending banks' approval to process payment to Iran.

However, the United States is unlikely to completely removed Iranian oil from the market because the loss of that supply would probably result in a politically unpalatable increase in oil prices.

“Given (US) President Trump's public affection for low oil prices, and the difficulty of getting countries like China and India to completely cut back, the White House will likely settle for less than zero next time though they may be able to achieve a reduction of several hundred thousand additional barrels,” Mike Tran, an analyst at RBC Capital Markets said on Thursday in a note.