Kish Oil Exchange, set up in the Persian Gulf island of Kish, opened for business last month to act as a major trade platform for Iranian light crude. On 13 July, the National Iranian Oil Company (NIOC) offered the first batch of 600,000 barrels of sweet crude to be traded at the exchange, but due to its high asking price no trade was registered. Yesterday, NIOC offered another 600,000 barrels at the asking price of USD 113.22 per barrel and a premium fee of 85 cents a barrel. Again no buyers were found and the exchange closed without registering any trade.
Apparently, the NIOC does not fully comprehend the nature of commodity exchanges. After spending a huge sum to set up the ultra-modern Kish Oil Exchange building, complete with electronic billboards and hundreds of computers and all types of amenities, the NIOC produces only two relatively low-volume batches of light crude in nearly a month (instead of having the supplies available on daily basis) and then sets up unrealistic minimum bidding prices and at the end comes out empty handed on both occasions. This is not the way to run a commodity exchange.
Meanwhile, the NIOC today reduced next month’s crude export prices to the lowest level this year. It set Iranian light rude for September shipment at USD 1.01 a barrel over the average of Persian Gulf benchmark Oman and Dubai grades, down USD 0.60 from August.
Photo: Kish Oil Exchange Billboard. 13 July 2011. FNA