Analysis: Iranian oil exports recover close to pre-sanction levels

10 April, 2019
Source: Platts

Iranian oil exports, which have been laboring under US sanctions since late last year, have recovered close to prior levels, supported by unflinching demand from China and South Korea, data from shipping sources and provisional tanker tracking data showed Tuesday.

Crude and condensate shipments from the Persian Gulf producer surged 12% to 1.70 million b/d in March, the highest since October, as key buyers scrambled to pick up more volumes before US sanctions waivers expire in early May.

Exports could fall in the coming months if the US tightens its grip on Iran crude purchases from those eight countries given special treatment, according to analysts.

The market is still searching for clarity, but many believe Iran's biggest customers will likely get an extension to the waivers.

Exports slumped to 1.08 million b/d in November a fall of almost 1.34 million b/d since May when the US withdrew from the Iran nuclear deal, according to Platts cFlow trade flow data showed. But since November volumes have recovered by 60% surprising many on the market.

Sources noted the rise in exports comes despite a huge fall in Iranian crude production because the OPEC member has been utilizing barrels from storage.

Data from Ursa, a geospatial analytics startup, which tracks oil inventories using satellite data, shows that Iran's crude inventories have fallen by almost 25% since early January, led by Kharg Island, the country's main export terminal, which saw a 30% decline in March.

"This suggests Iran's oil production has fallen below exports, forcing barrels from storage to cover any shortfall," said Geoffrey Craig, an energy analyst at Ursa. "With the US granting exemptions to some of Iran's biggest customers, exports seem to have fared better than anticipated."

Iran produced 2.69 million b/d of crude in March, according to the recent S&P Global Platts OPEC Survey, a fall of 280,000 b/d from November.

China, India and South Korea all significantly increased purchases of Iranian oil as supplies of particularly heavy to medium crude have tightened sharply in the past few months.

Demand for Iranian crude in the world's largest crude importer has rebounded in recent months. Flows to China averaged 627,710 b/d last month from levels of 571,464 b/d in February.

Indian buying interest in March was up with around 350,000 b/d sailing there, a rise of over 70,000 b/d from February.

Most analysts expect at least four of Iran's top crude and condensate buyers to get an extension of US waivers, albeit at lower levels.

China, India, Turkey and South Korea are likely to be granted one while exemptions for Italy, Greece, Japan and Taiwan are likely to halt, according to a recent survey carried out by Platts, which polled a dozen analysts closely tracking Iranian oil sanctions policy.
Italy, Greece and Taiwan have not imported Iranian oil since October despite having waivers.

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