Oil Delivery to Shell Under Spot Contract

Oil Delivery to Shell Under Spot ContractOil Delivery to Shell Under Spot Contract

The National Iranian Oil Company and Royal Dutch Shell have not signed a long-term contract, yet the British enterprise will receive a single oil cargo under a spot contract in July.

Mohsen Qamsari, director of international affairs at the National Iranian Oil Company, made the statement in response to a recent Reuters’ report in which it claimed that the Anglo-Dutch company had resumed purchases of Iranian crude, becoming the second major oil firm after Total to restart trade with Tehran after the lifting of sanctions, as trading sources and ship tracking data show, Mehr News Agency reported.

 A spot contract is a contract for buying or selling a commodity for settlement (payment and delivery) on the spot date, which is normally two business days after the trade date. A spot contract is in contrast with a forward contract where terms are agreed now but delivery and payment will occur at a future date. Commenting on resumption of oil sales to Shell, the official added that serious negotiations are underway to sign long-term contracts with the British oil giant and it is predicted that talks come to fruition sooner or later.

“Based on the terms of the spot contract, the crude cargo will be unloaded in July,” he said. According to shipping data, Shell fixed Suezmax tanker Delta Hellas to bring 130,000 tons of Iranian crude from Kharg Island on July 8 to continental Europe.

Trading sources said the cargo would unload in Rotterdam. Shell repaid its outstanding debt to the Persian Gulf country from pre-sanctions times earlier this year.

“Besides Total, European purchases of Iranian crude have gone to refineries in Spain, Greece and Italy since the sanctions were lifted in January this year,” the official said, noting that notwithstanding negotiations with British Petroleum, long-term contracts are yet to be signed.

International oil officials believe that Tehran’s reentry to the oil market has heightened tensions with arch-rival Saudi Arabia. Iran has resisted Saudi Arabia’s calls for output caps as Riyadh is itself aggressively expanding its buyer list ahead of an initial public offering for its state firm.

Major oil producers, including Venezuela and Nigeria, have been hit hard by a steep fall and protracted weakness in global oil prices. Iran’s crude exports are now close to pre-sanctions levels of around 2.5 million barrels per day.