The Oil Ministry has announced new guidelines for selling crude oil via the Iran Energy Exchange. Procedures that determine base prices have been amended.
Announced by Oil Minister Bijan Namdar Zanganeh Monday, the guidelines stipulate that the base price in each offer will be determined based on prices reported by key oil price indices, namely Nymex and WTI.
Prices will be set based on the minimum prices quoted on trading day, according to the notice, published on the Oil Ministry's news portal Shana.
Prices won’t be subject to any discount on the bulletin board and the best bidders will win the deal(s).
The base price would be quoted in USD and managing director of the National Iranian Oil Company will be in charge of announcing the prices.
In the previous guidelines, the base price of a barrel of oil was based on the average Brent quotations during 10 international business days up to two days prior to the offer.
There is no major alteration in almost all other terms compared to the past.
6% Upfront
As per the new instructions, those interested are required to pay 6% of the order value in rials or foreign currency prior to the start of trade. Only buyers capable of making the advance payment will be eligible to bid.
Payments can be made in rials or foreign currency and the exchange rate is based on open market rates on SANA system two days prior to the trading session.
SANA is a system operating under the supervision of central bank that records average exchange rates from across exchange bureaux.
The minimum purchase order will be 1,000 barrels for land delivery and 35,000 barrels for sea delivery.
Buyers who pay in rials would be exempt from the commitment to repatriate their earnings to the country if they want to export.
This is not the first time the NIOC is reconsidering oil sale conditions in the energy market. In April the company adjusted terms related to the minimum volume and pricing mechanism.
Despite sweetening the terms and conditions, the desired results have not been achieved. Except for one initial transaction in the early offerings, most of the subsequent oil offers have fallen flat with no buyers.
According to the IRENEX website, the NIOC has hardly managed to sell 1.1 million barrels of crude via the energy market since the program started in October 2018.
