Mazut War Heightens in Region

Mazut War Heightens in RegionMazut War Heightens in Region

With the South Pars phases coming on stream, Iran's gas production reportedly amounted to 100 million cubic meters per day, which has led to a surplus mazut capacity, sources close to Mehr News Agency reported.

Due to the rise in gas supply to industries and power plants, statistics issued by the National Iranian Oil Refining and Distribution Company reveal that during the first three months of the current Iranian year (started March 21), the average consumption of mazut, with a 25% decline, reached 25.5 million liters per day compared to that of last year which stood at 35 million liters.

According to the Oil Ministry officials, surplus mazut capacity amounts to 41 million liters per day which are either sold via bunkering centers in the Persian Gulf or exported to the Port of Fujairah in the UAE.

However, due to extensive export of mazut by Saudis and in particular Russia, which has flooded the Persian Gulf market, not only has the price of this oil product decreased dramatically, but supply also exceeded demand.

Currently, Russia, whose crude production capacity stands at 10 million barrels per day, is among major producers of mazut most of which was exported to Europe.

Pursuant to political disputes between Russia and European Union over Ukraine crisis, a large number of European states put a ban on Russian mazut as a result of which it flooded both the Persian Gulf and the Far East market.

Russian "M100" mazut is deemed to enjoy superior quality to that of Iran since it has less sulfur. More importantly, Russia uses the price factor as a leverage to compete with its rivals, including Iran and Saudi Arabia.

Furthermore, Saudis have lowered their prices not to lose the market share, which explains why there is a war price over this oil product.

Produced from the remains of raw oil processing, mazut 100 is graded as heavy furnace oil. It is produced only from the low sulfur raw oil. Surprisingly, there is very limited volume of this kind of mazut available for export from Russia because there are limited number of producers, including Lukoil and Rossibneft. Also, at least half of the produced volume is sold on the domestic market of Russia.