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Iranian oil exports dip in March, floating storage almost cleared

Iran's crude oil and condensate exports in March fell slightly from the previous month as refinery runs picked up but the OPEC producer has managed to clear almost all of its oil in floating storage.

Iranian oil exports dip in March, floating storage almost cleared
(Friday, March 31, 2017) 19:38

Iran's crude oil and condensate exports in March fell slightly from the previous month as refinery runs picked up but the OPEC producer has managed to clear almost all of its oil in floating storage.

Listen to our related podcast: May a big month for Iran amid rising crude oil output

Iran, which is allowed special status to increase output slightly under the recent OPEC deal, could be switching its focus to improving returns for its oil from maximizing its market share over a year after coming out of the sanctions doldrums, as its output begins to plateau.

Total estimated export volume on Aframaxes, Suezmaxes and VLCCs from Iranian ports in March dropped to 2.35 million b/d from 2.41 million b/d in February, data from cFlow, S&P Global Platts trade flow software, showed.

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This contrasts with the small output rise according to an S&P Global Platts survey, which estimated crude oil production at 3.77 million b/d in March compared with 3.75 million b/d in February thanks to a steady production boost due to the startup of the Azar and South Pars fields.

But with Iran's allocation under the OPEC/non-OPEC output agreement at 3.797 million b/d and its key competitors -- Russia, Saudi Arabia and Iraq -- having to clip their wings in recent months, OPEC's third largest producer is hoping to strengthen its relations among various global refiners.

Barrels held in floating storage again accounted for a proportion of Iran's exports in March and the country has now reduced the volume held on the water from over 40 million barrels early last year to around 5 million barrels, according to Platts estimates.

POLITICAL ROW WITH INDIA

Exports to Asia jumped sharply to 1.685 million b/d in March from 1.442 million b/d in February, led by a sharp increase in shipments to India.

India usurped China as the largest buyer, with 830,000 b/d of Iranian crude leaving for the refineries of the world's third largest crude importer. That compares with 507,071 b/d exported to India in February, data showed.

Indian demand for Iranian crude has been extremely strong this year but a political row between the countries threatens to curb these flows.

According to sources cited by the Times of India, Indian state refiners are set to cut oil imports from Iran in 2017-18 by a fifth, as New Delhi takes a more assertive stance over an impasse for the development of the 18.75 Tcf Farzad B gas field, which it wants awarded to an Indian consortium.

A spokesman at the Indian oil ministry was unavailable for comment while a representative at state-owned National Iranian Oil Company could not be reached for immediate comment.

Iran's oil minister Bijan Zanganeh last week dismissed India's threat to reduce Iranian imports.

"Iran is keen to develop its ties with India. But if New Delhi reduces its oil imports from Iran, we do not have a problem, as we have many customers and the demand for Iran's crude oil is greater than what we can currently supply," he said.

On top of this, the largest Indian buyer of Iranian crude is private refiner Essar Oil, which operates the 405,000 b/d refinery in Vadinar, and sources have said they don't expect this dispute to have much impact on Essar's appetite.

Out of the 830,000 b/d exported to India, more than 600,000 b/d was bound for Gujarat, home to refineries of India's two main private refiners Reliance and Essar Oil.

Indian state refiners that might be affected by the standoff between the two governments include Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL).

FLOWS TO CHINA, SOUTH KOREA RISE

Exports to China rose to 596,774 b/d in March, up 35,060 b/d from February.

Chinese demand for heavy Iranian grades has been robust this year but with OPEC/non-OPEC cuts, its demand for crude from the Atlantic Basin has increased sharply, particularly from Angola and the North Sea.

Japan, a major buyer of Iranian condensate, has reduced its interest sharply this year. Exports to Japan averaged 33,129 b/d in March, down from 95,321 b/d in February and 212,161 b/d in January.

March exports to South Korea averaged 225,710 b/d, up from 203,607 b/d. Iran has replaced Kuwait as South Korea's second biggest crude supplier in January and February, according to recent data from the Korea National Oil Corp.

South Korean demand for Iranian condensate has grown since late last year as oil refiner Hyundai Oilbank started commercial operations at its 130,000 b/d condensate splitter in November. Lower prices have been another factor behind the sharp rise in Iranian oil imports, according to South Korean officials.

LOSING APPEAL IN EUROPE

Flows to Europe in March fell to 523,291 b/d from 629,036 b/d, with Turkey and Italy emerging as the main destinations.

Demand from Greece, France, Italy and Spain fell month on month. Trade sources said that spot purchases of Iranian crude were beginning to fall due to stiffer competition from other heavy sour oil producers like Russia, Iraq and Saudi Arabia.

Despite these producers trimming output in recent months, it is a timely reminder for Iran that it may not be able to out-muscle key competitors for the European market.

One source said that European refineries have enough sour crude barrels to choose from and that, from a price perspective, Iranian crude was not as appealing for April/May loading dates.

"Iranian crude is still not as popular as it was before the sanctions. The price is not [as] attractive anymore. The Iranians are looking more at refiners in Northwest Europe [than the Mediterranean] but also looking more at the Far East, which supported them [during the sanctions]," said a trading source.

Another trade source noted that refiners that have term contracts with NIOC were buying steady amounts of Iranian crude but that spot purchases have been low recently.
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