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Iran still storing millions bbls crude at sea-trade

Floating storage less than half of summer peak.

September 23, 2010 3:25 by



OPEC-member Iran has reduced the amount of crude stored at sea in the past three months but still has as much as 20 million barrels anchored offshore, shipping and industry sources said.

The Islamic Republic typically struggles to sell its crude during summer months, when refiners are looking for lighter crudes to make more gasoline. This year, Western sanctions aimed at stymieing financial transactions that underpin trade have made its crude an even tougher sell.

The volume of crude in floating has steadily declined from around 33 million barrels in late July, and is half of its peak of more than 40 million barrels in June.

Wide-ranging international sanctions implemented this year have excluded crude oil sales, but Western-allied powers have increased political pressure on countries to trade less with Iran.

“There is a sense that Iran is becoming gradually more isolated,” a shipping source said. “They certainly have not run off their floating as briskly as they have done in the past.”

Iran’s idle oil supplies are costing Tehran hundreds of millions of dollars in lost revenue.

While shipping sources all agreed Iran was still storing millions of barrels of oil at sea, they gave varying estimates that Iran was using between seven and 10 tankers for storage.

According to Reuters calculations, eight VLCCs loaded with either crude or fuel oil have been anchored offshore in the Middle East for more than a month.

Iran has been storing straight-run fuel oil on VLCCs for at least three months, in an unprecedented move prompted by China’s poor feedstock demand and financing difficulties faced by buyers due to Western sanctions, industry sources said this month.

Still, an official at private Iranian tanker operator NITC said none of its vessels was storing Iranian crude or condensate on tankers at the moment.

SLOW DECLINE

Iran has managed to reduce more than half of its floating storage stocks since its peak of up to 25 tankers in June, the highest build up of Iranian crude at sea since 2008. The tankers are mainly very large crude carriers (VLCCs), which can each hold up to 2 million barrels of crude oil

The amount of Iranian oil stored at sea may fall further ahead of the northern hemisphere’s winter season, analysts said. Demand for its sour crude usually picks up at the end of the year as refineries churn out more heating oil and diesel.

“Iran’s floating storage is not a new phenomenon,” said Daniel Gerber with Swiss-based tanker tracker Petro-Logistics.

“A similar trend has emerged in previous years but this year’s sanctions have created complications, despite not directly targeting Iran’s crude oil sales.”

The sanctions, imposed in July by the United States and European Union, make it harder for traders to obtain insurance or pay for Iranian exports in currencies such as the euro and the dollar.

The U.S. sanctions have aimed to squeeze the Islamic Republic’s imports of petroleum products.

“Financial transactions have become a key challenge for oil buyers in deals with the National Iranian Oil Co,” said Vijay Mukherji, senior consultant at EMC.

Iran has no onshore storage for oil produced at the offshore Soroush and Nowruz oilfields, and always keeps some crude on floating storage off its Gulf coast.

U.S. refiners have long been prohibited from processing crude under sanctions, but refiners elsewhere face no such ban.

(Additional reporting by Luke Pachymuthu in Singapore; Editing by William Hardy)



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