Iran Could Offer Price Discounts to Regain Oil Markets

Iran could offer crude price discounts in the future to regain its former markets, a senior Iranian oil official said today, quoted by oil ministry news service Shana.

“Basically, Iran doesn't have any obligation to give discounts for selling crude oil because our existing oil customers at the moment can make their purchases in accordance with international laws without any worry,” Mohsen Ghamsari, NIOC's international affairs director, said.
”But as the oil minister has announced before, if the international circumstances become normal, in order to gain back our traditional markets, if necessary, one of Iran's leverages in this regard is price, considering the... situation [at the time],” he added.
(SHANA/Platts, 22 October)

The sanctions, in particular those imposed separately by the U.S. and EU in late June and early July last year, have slashed Iran's crude exports to around 1 million b/d from pre-sanctions levels of 2.3 million b/d.

Ghamsari, who is in charge of Iran's crude trade, also said oil supply in the market currently exceeded demand.

”Considering the global recession, the relation between demand and supply is not in a good condition, and I think, based on global factors, the oil price should naturally decrease, but because of brokers in the market, the stock market prices are not falling,” he said.

”Another reason for the oil price not falling, despite high supply in the market, is the high cost of production from some oil fields in the hands of big world powers because they want to keep production in these fields profitable,” he added.

Ghamsari said Iran's eventual recovery of its market share would push prices down.

”It is natural that after Iran's oil moves into the global markets again, under the current conditions, a decrease in the oil price can be seen. At the moment, based on the existing statistics, oil demand is 30% lower than the normal status,” Ghamsari said. “Obviously, all oil sellers want oil price to go up, but if we think realistically high oil prices will not benefit the producers much in the long run,” he added. (SHANA/Platts, 22 October)

North Sea Brent crude futures traded at $110.09/barrel today.

File photo: Iran's crude oil export terminal at Kharq Islands. (Getty Images)

HPLC Cuts Iran Crude Imports

Mindful of the impact of Western sanctions, India’s biggest oil importer has increased imports from Iraq at the expense of Iranian crude. Hindustan Petroleum Corporation Limited (HPCL) has virtually slammed the door on Iran for crude oil imports during 2013-14.

“Because of the sanctions the U.S. and the European Union imposed on Iran… there is no crude-lifting contract with NIOC for 2013-14,” said a statement by HPLC. (The Hindu, 28 July)

HPLC’s existing contract with Iraq’s State Oil Marketing Company (SOMO) for 2.25 million tons (45,000 barrels a day) of Basra light crude has been revised to 3 million tons (60,000 barrels a day). HPLC has also added a 50,000 barrels a day contract for 2013-14 with Saudi Arabian Oil Company (Saudi Aramco).

File photo: Iran's Kharq Oil Terminal (Getty Images)

Iranian Airlines Unable to Pay for Jet Fuel

Abdorreza Mousavi, director of Iranian Airlines Association, said today in Tehran that the domestic airliners do not have enough cash to pay for fuel and have been forced to cancel many flights. Mousavi said the state-run National Iranian Oil Company (NIOC) has threatened to confiscate airplanes for past due payments. His answer: Come and get them!

“We don’t have cash to pay for fuel. If the National Iranian Oil Products Distribution  Company (the company that provides jet fuel to Iranian airlines) wants to confiscate our planes, let them come and take them. We simply don’t have any money to pay for fuel,” Mousavi said. (Fars News Agency, 25 February)

Mousavi added that due to high fuel costs and the uncertainty in the value of the national currency, the Iranian airliners had to raise ticket prices and are now facing a decrease in demand.

“The currency fluctuations, the rising fuel cost and the (high) ticket prices forced on the airliners have caused a reduction in demand and decrease in passenger load factor,” Mousavi said.

Last November, Iranian airlines raised ticket prices for their domestic flights by 65 percent.

File photo: Iranian airliners (IRNA)

EU Publishes Details of New Iran Sanctions

The EU has published the implementing regulations covering its tough new sanctions against Iran. The sanctions impose a near-total embargo on financial transactions with Iran, covering all banks, including the Central Bank of Iran.

The sanctions also cover the entire oil and gas industry. The targets include the National Iranian Oil Company (NIOC) and its 20 subsidies, the Naftiran oil trading company and all its subsidies, the National Iranian Gas Company, the National Iranian Oil Refining and Distribution Company, and the National Iranian Tanker Company.

The Minister of Energy Majid Namjoo was added to the EU list of individuals subject to restrictive measures. The new sanctions also cover the Ministries of Petroleum and Energy. 

To read the text of EU implementing regulations, please click here.

Iran Oil Ministry Denies NIOC-IRGC Ties

Iran's oil ministry has denied the reports that the state-owned National Iranian Oil Company (NIOC) is linked to or under the control of the IRGC, Mehr News Agency reported on Tuesday.

On Monday, U.S. Treasury sent a report to Congress determining that the NIOC was “an agent or affiliate” of the IRGC. The Treasury, however, didn’t find sufficient proof to link the National Iranian Tanker Co., NITC, the main carrier for Iranian crude, to the Revolutionary Guards. (Bloomberg, 24 September)

“Treasury has reviewed classified reporting and unclassified information in support of these determinations,” Adam Szubin, director of the Office of Foreign Assets Control wrote to Congress. “As Iran’s most powerful economic actor, the IRGC dominates many sectors of the economy, including energy, construction, and banking,” he wrote.

“Recently, the IRGC has been coordinating a new campaign to sell Iranian oil, in order to evade international sanctions,” Szubin wrote.

Under today’s finding, any foreign financial institution “determined to knowingly facilitate significant transactions with or provide significant financial services” for NIOC, without a Treasury waiver, can be blocked from the U.S. banking system. (Reuters)

Iran Posts Senior Oil Executive in Beijing

National Iranian Oil Company (NIOC) has announced that the director of its fuel-oil trading division will head its office in Beijing. Maziar Hojjati will start in July and will oversee Iran’s oil exports to China. (China Economic Review, 26 June)

By July 1 the U.S. oil-related sanctions and EU’s ban on insuring tankers carrying Iranian crude will be in effect and are expected to cut the volume of Iran’s oil exports significantly. China, however, does not accept the legality of the sanctions imposed outside the UN framework and will continue purchasing Iranian crude at normal volume, making its purchases critical to Iran’s oil exports. Posting a senior oil executive in Beijing signifies China’s important position. 

India to Pay for Iran Crude with ‘Non-Strategic’ Commodities

India plans to pay for the imported Iranian crude in rupee credit line, to be used by Iran to purchase ‘non-strategic’ Indian commodities. Under the proposal, the National Iranian Oil Company (NIOC) will open a rupee account with Indian banks, and can use the money to purchase non-strategic commodities yet to be identified. The Press Trust of India reported today that a team of Indian officials would visit Tehran on 16 January to finalize the payment issue between the two countries.

India currently imports 370,000 barrels per day of crude oil from Iran, worth more than 1 billion dollars a month, using Turkey as a conduit to pay for it. This arrangement will come to an end shortly when the new US sanctions against foreign banks transferring funds through the Central Bank of Iran goes into effect.

Iran Oil at $109+

Annual Oil Revenues to Hit $100 Billion- Non-Oil Exports at $43 Billion

The average price of Iranian crudes in November reached $109.58 per barrel, the national Iranian Oil Company (NIOC) announced today. Iran light crude sold at an average of $112.19 a barrel for Asian destinations and $107.95 for the Mediterranean. Iran heavy was sold at an average of $110.39 for Asia and $106.25 for the Mediterranean. The oil revenues in the current Iranian calendar, ending 20 March 2012, is expected to be close to $100 billion, a historic high for the country.

Meanwhile, Iran Customs reported today that the volume of non-oil exports in first eight months of the current Iranian year has hit $28.6 billion. At this rate, the annual non-oil exports will be close to $43 billion mark, also a historic high for the country.

Iran Oil at $114

The price of Iran Light Crude reached $114 per barrel last week, while Iran Heavy was traded at $111 per barrel. The average price of Iran crude oil basket traded in world market was at $113.66 per barrel, National Iranian Oil Company (NIOC) announced today [Fars News Agency, 16 November].

Iran Exploring New Oil and Gas Fields

The National Iranian Oil Company (NIOC) today announced the start of exploration of three new oil and gas fields. The new fields are the Khayyam gas field in Asalouyeh with in-place reserves of 227 billion cubic meters, Madar gas field, also in Asalouyeh, with in-place reserves of 495 cubic meters, and an unnamed oil field in the Iraqi border area where eight drilling rigs are already stationed.

SHANA, NIOC’s news website, reports that a budget of $350 million has been allocated for exploration of the new fields in the current Iranian fiscal year, ending in March 2012 [SHANA, 11 October].

Iran Announces Oil Pipeline Deal with S. Korea

The National Iranian Oil Company (NIOC) announced today that it has signed a 3.5 billion dollar deal with an unnamed South Korean company to construct a 1,680km oil pipeline linking Iran’s Caspian Sea port of Neka to Jask, an Iranian port in the Sea of Oman. The pipeline would facilitate oil swap between Iran and the oil-rich Caspian Sea littoral states. No dates for the start or completion of the project were released [Mehr News Agency, 7 October].

Iran is planning to raise the volume of oil swapping with the Caspian countries from the present 25,000 barrels per day to 200,000 bbp by the end of current Iranian calendar year (March 2012), and with the new pipeline it can substantially increase that volume. The Central Asian countries would benefit from the deal by selling oil at Jask.

First Shipment of Crude Is Sold at Kish Oil Bourse

Iran’s Bourse Organization announced today that the first shipment of 500,000 barrels of Iranian heavy crude was sold on Thursday at Kish Oil Bourse, a commodity exchange set up in the Persian Gulf island of Kish to trade in Iranian crude. The shipment was sold at USD 105.49 per barrel, with no premium added. [Mehr News Agency, 19 August].

The Kish Bourse began its operation last July. Three shipments of crude could not be sold in previous sessions. Today’s successful sale marks the actual start of the oil exchange. The National Iranian Oil Company (NIOC) is planning to offer shipments of 500,000 barrels of light or heavy crude on daily basis at the facility.

File Photo: Kish Oil Bourse / Mehr

India’s Mengalore Pays $1.43 Billion of Its Debts

The National Iranian Oil Company (NIOC) announced on Monday that one of the Indian refiners, Mengalore, has paid $1.43 billion of its debts to Iran through a Turkish bank, with $1.2 billion remaining. NIOC consequently lifted the ban on crude shipment to that refinery. Other Indian refiners still carry large debts to Iran. The total amount of India’s debts to Iran prior to the recent payment by Mengalore totaled $5-7 billion, depending on different numbers provided by NIOC, the Central Bank of Iran and the Iranian press.

Kish Oil Exchange Fails to Generate Business

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