Iran Crude Supply Boost in 2016

Iran Crude Supply Boost in 2016Iran Crude Supply Boost in 2016

Iran’s crude exports are likely to remain restricted until the first half of next year, when it is “reasonable” to expect international sanctions against the OPEC producer to be lifted, according to a US government official.

Overseas shipments will probably stay at 1 million to 1.1 million barrels a day until the terms of a deal between Iran and world powers over the Persian Gulf state’s nuclear program are implemented, allowing sanctions to be lifted, said Amos Hochstein, special envoy and coordinator for international energy affairs at the US Department of State, Bloomberg reported.

The US is keeping a “very close” watch on Iranian oil exports, he said in an interview in Singapore. Iran is preparing to increase shipments at a time when crude prices are near six-year lows amid a global glut sparked by the US shale boom.  The Middle East producer, which was the second-biggest supplier in the Organization of Petroleum Exporting Countries before sanctions curbed its exports, is keen to retake market share it lost to producers, including Saudi Arabia, Mexico and Russia.

“The stage that we’re in today is that Iran has to implement its requirements under the agreement,” Hochstein said at the Singapore International Energy Week on Tuesday. “Once those are done and they have been verified, sanctions will be removed.”

Iran is now the fifth-largest OPEC member, with output in September averaging 2.8 million barrels a day, from 3.6 million at the end of 2011. Countries, including China, India and Japan, had to get a waiver from the US to buy limited amounts of Iranian crude or risk losing access to parts of the global financial system.

“The five countries and Taiwan that have been importing through this entire process through the period of sanctions can continue to do so under the same restrictions that have been applied since the joint plan of action,” he said. “I do expect Iran to take advantage of the fact that sanctions are removed and reenter the energy markets at that time when they’re able to reach those milestones,” Hochstein said, referring to requirements the Middle East nation needs to meet under the nuclear deal.

  Oil Loadings at 7-Month Low

Iran's exports of crude oil and condensate dropped to a seven-month low this month, hit by refinery maintenance and a lull in demand ahead of winter, according to an industry source with knowledge of the nation's tanker loading schedule.

Still, loadings of the light oil condensate grade were robust–the second highest for the year—due to Iran's attractive pricing relative to other producers, the source said.

Iran this month exported 1.07 million bpd of crude and condensate, down 13% from revised figures in September and the lowest since March, when India and Japan took no oil to stay within sanction limits, said the source who keeps a close watch on the producer's shipping program.

Asia's Iranian crude oil imports for the last two years have dipped in October, however, before recovering due to seasonal winter demand, and some industry sources said Chinese loadings are likely to rebound again in the coming months.

Iran's exports of condensate, a byproduct of natural gas output, in October totaled 240,000 bpd, the second-highest this year and down 10% from top-month September.

Industry sources attributed the recent high condensate shipments in part to Unipec–the trading arm of Chinese state giant Sinopec—resuming its purchases after laying off the light oil for several months, taking about 1 million barrels each month in September and October. "Iranian condensate is very inexpensive and we have been paying close attention," said a source with a North Asian buyer of condensate from Iran's South Pars gas fields. To counter competing condensate from Qatar, among others, Iran has offered discounts to retain market share after its crude exports have more than halved from 2.5 million bpd in 2011, sources said.