European hopes of cheap Iran oil dashed

European hopes of securing cheap deals for imports of crude oil from Iran are apparently dashed, with some big buyers complaining that the country was refusing to budge on its terms.   

Those companies had been salivating for long at the prospects of Iran opening its oil stock floodgates to the market when sanctions were lifted on the country.

With that date having come and gone by about two months now, European major buyers say Tehran is unwilling to loosen its terms.

Ahead of the lifting of sanctions, Western media had generated high expectations of an Iranian urge to get rid of its crude, citing the country’s oil held in floating storage as well as existing oil glut in the market.

Meanwhile, Iran’s assertions that it wanted to ramp up production by 1 million barrels per day to redeem its lost market share raised those expectations.

Some analysts say Iran may be waiting until oil prices which are hovering at $40 per barrel near lows pick up further before taking steps to regain market share.

“You could think the Iranians have no incentive to increase their production while the prices are low. They lived like it for years already – they can cope with another few months,” Reuters quoted one trading source as saying on Wednesday.

Another source said Iran would not consider offering discounts to win back market share as it would mean an escalation of a price war and would not benefit Iran or its customers.

Gasoline barter deals

Iran is exchanging its fuel oil with gasoline through a rare barter arrangement worked out after the lifting of sanctions on the country, a report says.

Barter deals with the likes of Swiss-based Vitol and Glencore and Russian companies have wiped out short-term fuel oil available for export, a senior Iranian trading official was quoted as saying.

“There is no extra fuel oil available in the short term, because they are all committed,” the unnamed official told Reuters on Tuesday.

International oil companies have snapped up a series of deals with Iran after the lifting of sanctions on the country in January.

France’s Total clinched the first major deal for imports of 200,000 barrels per day of Iranian crude and is about to receive a shipment later this month. Three other tankers carrying Iranian crude are heading toward Europe.

Despite being an oil exporter, Iran imports gasoline to cover shortfalls in the country of over 80 million people, where demand has gone through the roof amid rising numbers of cars.

The big traders resumed moving gasoline to Iran shortly after sanctions were removed, the official said, adding Iran pays back in fuel oil instead of a cash settlement.

According to another official, Iran usually exports 700,000-800,000 tonnes of fuel oil a month during the spring months starting from late March.

Meanwhile, the country’s demand for gasoline rises ahead of the New Year or Nowruz when road travel increases over two weeks from late March.

By Press TV