The world’s largest independent oil trader said it is "business as usual" with Iran, as Vitol Group BV confirmed buying oil from the country after the end of economic sanctions.
“We’ve bought some, yes we have,” Vitol chief executive officer, Ian Taylor, told Bloomberg in a TV interview. “We’ve bought a bit of everything really, bit of products, bit of condensate. It’s very much business as usual."
The comments ahead of the annual IP Week oil-industry gathering in London are the first confirmation by a trading company that it has effectively resumed buying from Iran after the lifting of sanctions.
Several European oil companies have chartered tankers this month to load Iranian crude, but none has yet acknowledged a purchase.
Vitol expects Iran to produce up to 500,000 barrels a day in additional oil by the middle of the year and another 200,000 barrels a day by the yearend.
The Persian Gulf state, unencumbered since last month by sanctions on its crude exports, is adding to the "supply weight" in world markets, Taylor said.
Iran pumped an average of 3.6 million barrels a day in 2011, according to data compiled by Bloomberg. Production fell in 2012 to a 25-year low of 2.7 million barrels a day.
The country pumped 2.8 million barrels a day on average last year. Under international sanctions, Iran was allowed some sales to buyers, including China, India, Japan, South Korea and Turkey.
Taylor said Iran’s return to international markets has not been particularly complicated, though he acknowledged "some inevitable teething problems as we get Iran back going again with things like banks and insurance" for the tankers.
"We, like everybody else, did some preparatory work,” he said. “It was clear that it was coming. We obviously talked to them about what would happen once it did come. So people were relatively ready."
Aside from Vitol, several European refiners have chartered tankers this month that will deliver about 136,000 barrels a day of Iranian crude to the region, equivalent to almost a quarter of the Middle Eastern nation’s shipments before sanctions were imposed.
Spanish refiner Cepsa, France’s Total and Lukoil of Russia have provisionally booked cargoes to sail from Iran’s Kharg Island to European ports in the next two weeks, according to shipping reports compiled by Bloomberg.
While some of those bookings may not be completed, more cargoes could also be chartered before the end of the month.
European Relations
Iran said on Saturday it planned to export as much as 300,000 barrels a day of crude to Europe.
Total has agreed to buy about 160,000 barrels a day starting on Feb. 16, the Oil Ministry’s official news agency Shana reported on Saturday, citing Oil Minister Bijan Namdar Zanganeh.
"Iran has not signed a deal yet with Italian oil company Eni," Zanganeh said.
"Italian officials are expected in Tehran soon to complete an oil purchase agreement for about 100,000 barrels a day."
Italy’s Saras SpA refinery is also interested in buying 60,000 to 70,000 barrels a day.
Taylor said Vitol executives planned to meet with Iranian officials in London during the IP Week gathering.
"They’re very sharp, very good. They haven’t changed a lot," he said. "So we’ll carry on the discussions that we dropped off a few years ago."
"Decade" of Cheap Oil
"Oil prices will stay low for as long as 10 years, as Chinese economic growth slows and the US shale industry acts as a cap on any rally," Taylor said.
"It’s hard to see a dramatic price increase … We really do imagine a band and that band would probably naturally see a $40 to $60 type of band. I can see that band lasting for five to 10 years."
The lower boundary would imply little price recovery from where Brent crude, the global price benchmark, trades at about $35 a barrel. The upper limit would put prices back to the level of July 2015, when the oil industry was already taking measures to weather the crisis.
"You have to believe that there is a possibility that you will not necessarily go back above $100, you know, ever," he said.
The problem is that "there is so much more supply" while the global economy is more efficient in consuming crude. On top of that, Iran is returning to the market and growth in emerging markets, the biggest engine of oil demand, is slowing.
The forecast, made as the oil trading community’s annual IP Week gathering starts in London on Monday, would mean oil-rich countries and the energy industry would face the longest stretch of low prices since the 1986-99 period, when crude mostly traded between $10-$20 a barrel.
