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

Is Air Travel Safe?

Aviation expert says despite tragic losses of Malaysian Airlines flights 370 and 17, industry experienced lowest fatality rate in recorded history last year More

Multimedia 100 Days Later, Nigerian Girls Still Held

Activists holding rallies in Nigeria and several other countries to mark 100th day of captivity for more than 200 schoolgirls being held by Boko Haram More

Chocolate Too Bitter? Swap Sugar for Mushrooms

US food technology company develops fermentation process using mushrooms to reduce bitterness in cocoa beans, believes it will cut sugar content in candy 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.
US Carriers Suspend Travel to Israeli
X
Carolyn Presutti
July 23, 2014 1:21 AM
The United States is prohibiting American carriers from flying to Israel's airport in Tel Aviv for 24 hours, because of rising violence between Israel and Hamas militants. The action was announced on Tuesday, after a rocket fired by Hamas militants in the Gaza Strip landed near the airport. As VOA's Carolyn Presutti tells us, international officials soon may have to determine which combat zones are too dangerous for commercial flights.
Video

Video US Carriers Suspend Travel to Israel

The United States is prohibiting American carriers from flying to Israel's airport in Tel Aviv for 24 hours, because of rising violence between Israel and Hamas militants. The action was announced on Tuesday, after a rocket fired by Hamas militants in the Gaza Strip landed near the airport. As VOA's Carolyn Presutti tells us, international officials soon may have to determine which combat zones are too dangerous for commercial flights.
Video

Video NASA Focuses on Earth-Like Planets

For decades, looking for life elsewhere in the universe meant listening for signals that could be from distant civilizations. But recent breakthroughs in space technology refocused some of that effort toward finding planets that may harbor life, even in its primitive form. VOA’s George Putic reports on a recent panel discussion at NASA’s headquarters, in Washington.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.
Video

Video Relic of Saint Draws Catholics Worried About Immigration Issue

A Roman Catholic saint who is a figure of devotion for those crossing the border into the United States is attracting believers concerned about the plight of undocumented immigrants. Mike O'Sullivan reports from Los Angeles, where a relic of Saint Toribio has drawn thousands to local churches.
Video

Video US Awards Medal of Honor for Heroics in Bloodiest of Afghan Battles

U.S. combat troops are withdrawing from Afghanistan, on pace to leave the country by the end of this year. But on Monday, U.S. President Barack Obama took time to honor a soldier whose actions while under fire in Afghanistan earned him the Medal of Honor. VOA's Jeff Seldin has more from the Pentagon.
Video

Video Ukraine Rebels Surrender MH17 Black Boxes

After days of negotiations, a senior separatist leader handed over two black boxes from an airliner downed over eastern Ukraine to Malaysian experts early Tuesday. While on Monday, the U.N. Security Council unanimously demanded that armed groups controlling the crash site allow safe and unrestricted access to the wreckage.
Video

Video In Cambodia, HIV Diagnosis Brings Deadly Shame

Although HIV/AIDS is now a treatable condition, a positive diagnosis is still a life altering experience. In Cambodia, people living with HIV are often disowned by friends, family and the community. This humiliation can be unbearable. We bring you one Cambodian woman’s struggle to overcome a life tragedy and her own HIV positive diagnosis.
Video

Video Nature of Space Exploration Enters New Age

Forty-five years ago this month, the first humans walked on the moon. It was during an era of the space race between the United States and the Soviet Union. World politics have changed since then and -- as Elizabeth Lee reports -- so has the nature of space exploration.

AppleAndroid

World Currencies

EUR
USD
0.7305
JPY
USD
101.53
GBP
USD
0.5830
CAD
USD
1.0656
INR
USD
60.075

Rates may not be current.