29 Mar 2024
Friday 22 January 2016 - 18:29
Story Code : 198062

Iranian Oil Set to Return to Europe Next Month

TEHRANIran is preparing to restart regular crude-oil shipments to the European Union possibly as early as February, Iranian officials said this week, despite a host of barriers to selling its petroleum to the West.




Iran's state-owned National Iranian Oil Co. is tentatively preparing a shipment of at least 1 million barrels of light crude to a Mediterranean port in the European Union around mid-February, an Iranian official said. It would be the first shipment to the EU since an embargo on Iranian oil was lifted last week as part of the end of western sanctions.


The preparations come as rivals like Russia and Saudi Arabia have been aggressively discounting their crude oil to Europe in a price war ahead of Iran's full return to the market. Both countries seized a greater share of the Iranian market after western countries tightened sanctions on Iran in 2012.


With sanctions lifted over the weekend, Iran has pledged 500,000 barrels a day of new crude exports in the next few months and 1 million barrels a day within a year.


"Most of that oil will go to Europe," one Iranian government official said, reflecting the country's desire to claw back customers in a market it dominated before sanctions. The rest will chiefly go to Asia, the official said.


Iranian officials here wouldn't say who had committed to buy the shipment. One official said refineries in Spain Italy, France and Greece were best suited for the delivery, and those countries were previous buyers of Iran's oil before sanctions.


No Iranian oil has reached the EU since western sanctions were tightened in mid-2012, apart from a small number of tankers delivered to Italy to honor pre-sanctions contracts.


It remains unclear how the European refineries will be able to legally purchase the crude. Several layers of U.S. sanctions remain in place over terrorism, human rights and weapons issues, including a ban on dollar transactions with the Islamic Republic. Most oil transactions are carried out in dollars.


Rokneddin Javadi, the managing director of the National Iranian Oil Co., said limitations on Iran would hinder the country's ability to ramp up exports to about 1.5 million barrels a day, from about 1 million barrels a day now.


But in interviews here in Tehran, Iranian oil officials said they were looking for legal temporary solutions to sell the oil and said all the additional crude would be sold on international markets within no more than three months. For instance, crude buyers could initially buy oil with written commitments and get Iranian government insurance for tankers.


Iran also sells and delivers much of its oil through Iranian companies. The first European shipment could be delivered by the National Iranian Tanker Co., officials said.


Oil companies such as Total SA of France, Anglo-Dutch giant Royal Dutch Shell PLC and Spain's Cepsa are in talks with Iran to buy crude, the official said. Total and Shell declined to comment. Cepsa couldn't be reached.


Iran's return to the market has helped send oil prices into a tailspin because the world is already well supplied with oil, with production outstripping demand by a million barrels or more on a given day. Oil inventories are nearing capacity around the world as companies store oil they can't sell now or want to sell later at higher prices.


Oil prices rallied on Thursday and Friday, with Brent crude, the global benchmark, rising above $30 a barrel. But the value of a barrel of oil has fallen more than a fifth just this year and more than 70% since June 2014.


The market rout has forced Iran to consider bartering its oil in exchange for goods as the country tries to avoid selling its resources on the cheap. In Tehran, some officials are optimistic that European refiners would reduce Russian oil purchases because their facilities were designed to accept Iranian-style crude.


"Other producers will cut to make room for us," one official said.


By Morning Star




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