Iran losing billions as crude exports extend the slump
Gulf Times - 06 July, 2012
http://gitm.kcorp.net/index.php?id=607894&news_type=Economy&lang=en
Iran will see its July oil exports more than halved from regular levels seen
last year because tough new Western sanctions are stifling flows and costing
Tehran more than $ 3bn in lost revenue per month.
Declining oil exports, the lifeblood of the Iranian economy, will increase
Tehran’s struggle to contain spiralling inflation and mounting unemployment
amid its standoff with the West over its nuclear programme.
“They will eventually have to close down production. Right now it seems very
unlikely that they will get any relief from sanctions any time soon,” said
an executive with a Western oil firm with a long history of dealing with
Iran.
Exports in July will be a maximum of 1.1mn bpd, said an industry source
familiar with Iran’s monthly shipping plans and who declined to be named due
to the sensitivity of the matter.
Iranian exports have declined steadily from the 2.2mn bpd average in 2011,
as its oil buyers cut imports to comply with US and European Union sanctions
imposed due to concerns the country is attempting to build a nuclear bomb.
Iran says its nuclear activities are peaceful.
It was estimated to have shipped between 1.2mn and 1.3mn bpd in June,
industry sources said last month.
But actual July exports could be even lower as top buyer China disputes
freight costs with Iran’s top tanker company, delaying the loading of
cargoes set to flow east.
India, Iran’s second-largest oil buyer, could also reduce July loadings as
Iran struggles to find tankers of the size Indian refiners require.
Japan and South Korea, among Iran’s top five buyers, have halted all Iranian
imports this month due to complications with shipping insurance, also
sanctioned by the EU.
Japan is expected to resume buying this year. It has been granted exemption
from US sanctions last month after having already steeply reduced purchases.
If Iran exported 1.1mn bpd in July, it would mean the country’s budget
losing around $ 3.4bn revenue this month compared with a year ago, when
exports amounted to 2.2mn bpd and Brent oil prices stood at around $ 110
versus $ 100 today.
Iranian oil usually sells at a discount of several dollars to benchmark
dated Brent.
As sales fall, Iran has been forced to store its unwanted crude on tankers
in the Gulf and cut production to an estimated 2.95mn bpd, the lowest in
nearly a quarter of a century, as it runs out of onshore and offshore
storage capacity.
In April, shipping sources said Iran had been forced to deploy more than
half its fleet to store oil at anchorage in the Gulf, equating to 33mn
barrels.
The country is expected to store at least a further 8.3mn barrels this
month, double the amount in June, the source familiar with the shipping
plans said.
But as it stores more crude, it may struggle to complete deliveries to Asian
customers, who request Iran makes deliveries on its own tankers.
Iran is expected to load a maximum of 890,000 bpd for its top Asia buyers,
the source said, down 40% from the 1.48mn bpd taken during the same period
last year.
China was scheduled to take a maximum of 492,000 bpd for July loading and
India some 300,000 bpd at most.
Japan will load around 98,000 bpd for mid-August delivery, industry sources
said. In Europe, Turkey and Italy were the only countries which continue to
import Iranian oil after the start of the EU embargo.
Turkey is buying around 160,000 bpd of oil from Tehran, down about a fifth
from last year’s average. Italy was exempted from EU sanctions because it is
owed about $ 1bn by Iran and South Africa is also continuing imports.
This week, Kenya emerged as the potential buyer of up to 80,000 bpd of
Iranian oil, but quickly cancelled the deal under pressure from Washington
and Brussels.
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