News / Economy

Iran Sends Out Feelers for Return to Oil Markets

FILE - An oil technician makes his way to the oil separator facilities in Iran's Azadegan oil field southwest of Tehran, April 15, 2008.
FILE - An oil technician makes his way to the oil separator facilities in Iran's Azadegan oil field southwest of Tehran, April 15, 2008.
Reuters
Iran is reaching out to its old oil buyers and is ready to cut prices if Western sanctions against it are eased, promising a battle for market share in a world less hungry for oil than when sanctions were imposed.
 
New Iranian President Hassam Rouhani's “charm offensive” at the United Nations last month, coupled with a historic phone call with U.S. President Barak Obama, revived market hopes that Iranian barrels could return with a vengeance if the diplomatic mood music translates into a breakthrough in the stand-off over Tehran's disputed nuclear program.
 
The Islamic Republic's crude exports more than halved after the European Union and United States, which accuse Tehran of seeking nuclear weapons, tightened sanctions in mid-2012, cutting its budget revenues by at least $35 billion a year.
 
“The Iranians are calling around already saying let's talk ... You have to be careful, of course, but there is no law against talking,” said a high-level oil trader, whose company is among many that stopped buying Iran's oil because of sanctions.
 
The West's energy watchdog, the International Energy Agency (IEA), said this month that despite the first high-level talks between Iran and the United States since the 1979 Iranian revolution, few expected sanctions to be eased soon.
 
“Rather, most expect that turning the clock back on sanctions will be a drawn-out process based on tangible diplomatic progress with regard to the issues at hand, which many still view as a remote prospect,” the IEA said.
 
However, last week Iran issued its first tender in two years to import fertilizers, in what traders said could be a test ball for the easing of sanctions on funding import-export operations with the country.
 
It is also sending strong signals to oil markets about its pricing policies should it make headway in the nuclear talks with the West. The next round of talks with the U.N. nuclear agency is planned for next week.
 
“Given the new circumstances, a large number of traditional buyers of Iranian oil are making the preparations and providing the facilities for raising their oil purchase from Iran,” news agency Shana quoted National Iranian Oil Co's head of trading Mohsen Ghamsari as saying on Tuesday.
 
Different market
 
Only five countries - China, India, Japan, South Korea and Turkey - are still buying Iranian oil. But they are taking just 1-1.2 million barrels a day, about half what Iran shifted before the sanctions were imposed in 2012, when more than a dozen countries were buyers.
 
All EU countries have stopped purchases, while the United States hasn't bought Iranian crude for almost two decades.
 
Several months before the EU imposed its embargo, executives from large Western companies and buyers of Iranian oil, such as Shell and Total, said the move would lead to higher oil prices and EU consumers would be the main losers.
 
But benchmark Brent oil prices have barely changed in the past two years, hovering in the $90-$120 a barrel range despite the loss of Iranian barrels and supply disruptions from Iraq, Libya and Nigeria.
 
The reason behind stable prices was strong growth in oil output in the United States, which is soon to become the world leader. There was also a spike in Saudi output to an all-time high, weaker demand growth in Asia and a decline in demand in Europe.
 
According to the IEA, demand in developed European countries has fallen by two million bpd in the past five years, or three times what the region was getting from Iran.
 
“It's a different market. It's a market that has a greater degree of supply than the market they, Iranians, exited,” said a trader with an oil major, who used to buy Iranian oil.
 
Before the EU sanctions, traders said the most common debate in the market was whether China would swallow all or just part of the Iranian oil unwanted elsewhere.
 
But Beijing has played ball with the West and tried to cut imports from Iran.
 
Arch-rival Iraq, which overtook Iran as OPEC's second-largest oil producer, said last week China was seeking to steeply raise Iraqi oil purchases.
 
Iran's Ghamsari said Iran might have to set or accept lower prices to go back to the market.
 
“Naturally, a resupply of Iran's crude oil on the world markets will result in oil price cuts. The current figures show that the demand for oil is 30 percent lower than in normal conditions,” he told Shana.
 
Big Saudi shift
 
Pricing won't just depend on whether Iran returns to the market, but how fast. Though its oilfields could reverse much of the production cuts within months, full recovery would take over a year.
 
Quality will also play an important role.
 
“If I'm allowed to buy again, I will jump on it straight away,” said a European refiner, who asked not to be named. “Europe is terribly short of sour, heavy crude; the only one available is Russia's Urals, and it has become very expensive.”
 
Olivier Jakob at consultancy Petromatrix agrees that Europe's struggling refiners will not hesitate long before buying Iranian crude oil, especially at cheaper prices.
 
Iranian oil competes with Russian and Iraqi grades of the same heavy, sour quality, which has become prized since the U.S. shale oil boom increased global supply of previously scarce light oil.
 
However, a trader with another major said a jump in Iraqi Basra and Kazakh supplies next year should saturate demand for heavy oil in Europe, leaving not much space for Iranian oil.
 
Much will also depend on whether Saudi Arabia will make room for its arch-rival's oil and cut exports to prevent a steep fall in prices.
 
Saudi Arabia's intelligence chief has said the kingdom will make a “major shift” in relations with the United States in protest at its perceived inaction over the Syrian civil war and its overtures to Iran, though it remains unclear how that might affect oil policies.

You May Like

Mood Tense Ahead of Scotland Independence Vote

As race to persuade undecided voters continues, No voters say they believe life in Scotland will slowly improve and do not want to take a risk by endorsing independence More

South Africa’s 'Open Mosque' Admits Everyone, Including Critics

Open Mosque founder plans to welcome gay worshipers and allow women to lead prayers More

Ukrainian Activist in Despair About Future of Her Country

IrIna Dovgan, accused of being a spy and tortured by pro-Russian separatists, is appealing to UN Human Rights Council to support her country More

This forum has been closed.
Comment Sorting
Comments
     
by: Mazdah from: Iran
October 23, 2013 4:58 AM
I guess the Saudi degeneracy wouldn't like that...!!! Saudis, what a joke

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
NASA Picks Boeing, SpaceX to Carry Astronauts Into Spacei
X
September 17, 2014 4:20 AM
The U.S. space agency, NASA, has chosen Boeing and SpaceX companies to build the next generation of spacecraft that will carry U.S. astronauts to the International Space Station by the year 2017. The deal with private industry enables NASA to end its dependence on Russia to send space crews into low Earth orbit and back. Zlatica Hoke has more.
Video

Video NASA Picks Boeing, SpaceX to Carry Astronauts Into Space

The U.S. space agency, NASA, has chosen Boeing and SpaceX companies to build the next generation of spacecraft that will carry U.S. astronauts to the International Space Station by the year 2017. The deal with private industry enables NASA to end its dependence on Russia to send space crews into low Earth orbit and back. Zlatica Hoke has more.
Video

Video Future of Ukrainian Former President's Estate Uncertain

More than six months after Ukraine's former President Viktor Yanukovych fled revolution to Russia, authorities have yet to gain control of his palatial estate. Protesters occupy the grounds and opened it to tourists but they are also refusing to turn it over to the state. VOA's Daniel Schearf reports from Mezhigirya, just north of Kyiv.
Video

Video China Muslims Work to Change Perceptions After Knife Attacks

China says its has sentenced three men to death and one woman to life in prison for a deadly knife attack in March that left more than 30 dead and 140 injured. Beijing says Muslim militants from China's restive western region of Xinjiang carried out the attacks. Now, more than six months after the incident, residents in the city are still coping with the aftermath. VOA's Bill Ide has more from Kunming.
Video

Video Enviropreneur Seeks to Save the Environment, Empower the Community

Lorna Rutto, a former banker, is now an ‘enviropreneur’ - turning plastic waste into furniture and fences discusses the challenges she faces in Africa with raw materials and the environment.
Video

Video West Trades Accusations Over Ransoms

As world leaders try to forge a common response to the threat posed by Islamic State militants in Iraq and Syria, there is simmering tension over differing policies on paying ransoms. In the past month, the jihadist group has beheaded two Americans and one Briton. Both countries refuse to pay ransom money. As Henry Ridgwell reports for VOA from London, there is uncertainty in the approach of some other European nations.
Video

Video Scotland Independence Bid Stokes Global Interest

The people of Scotland are preparing to vote on whether to become independent and break away from the rest of Britain, in a referendum being watched carefully in many other countries. Some see it as a risky experiment; while others hope a successful vote for independence might energize their own separatist demands. Foreign immigrants to Scotland have a front row seat for the vote. VOA’s Henry Ridgwell spoke to some of them in Edinburgh.
Video

Video Washington DC Mural Artists Help Beautify City

Like many cities, Washington has a graffiti problem. Buildings and homes, especially in low-income neighborhoods, are often targets of illegal artwork. But as we hear from VOA’s Julie Taboh, officials in the nation's capital have come up with an innovative program that uses the talents of local artists to beautify the city.
Video

Video US Muslim Leaders Condemn Islamic State

Leaders of America's Muslim community are condemning the violent extremism of the Islamic State group in Iraq and Syria. The U.S. Muslim leaders say militants are exploiting their faith in a failed effort to justify violent extremism. VOA correspondent Meredith Buel reports.
Video

Video Bedouin Woman Runs Successful Business in Palestinian City

A Bedouin woman is breaking social taboos by running a successful vacation resort in the Palestinian town of Jericho. Bedouins are a sub-group of Arabs known for their semi-nomadic lifestyle. Zlatica Hoke says the resort in the West Bank's Jordan Valley is a model of success for women in the region.


Carnage and mayhem are part of daily life in northern Nigeria, the result of a terror campaign by the Islamist group Boko Haram. Fears are growing that Nigeria’s government may not know how to counter it, and may be making things worse. More

AppleAndroid

World Currencies

EUR
USD
0.7722
JPY
USD
107.08
GBP
USD
0.6171
CAD
USD
1.1041
INR
USD
61.075

Rates may not be current.