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

Brutality Eroding IS Financial Support

Director of National Intelligence James Clapper says IS's penchant for publicizing beheadings, other brutal forms of punishment hurts group’s bottom line More

Studies: Climate Change a Factor in Disasters in Syria, California

The studies point to the possibility of clear and present dangers from a threat often considered to be far in the future More

Video Afghan Refugees Complain of Harassment in Pakistan

Afghan officials and human rights organizations assert that Pakistani authorities are using deadly attack at school in Peshawar as pretext to push out Afghan refugees 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.
Kerry Seeks Assurances of Russian Non-Interference in Ukrainei
X
March 03, 2015 3:11 AM
U.S. Secretary of State John Kerry has told his Russian counterpart, Sergei Lavrov, that his country could face further consequences to what he called its “already strained economy” if Moscow does not fully comply with a cease-fire in Ukraine. The two met, on Monday, on the sidelines of a U.N. Human Rights Council meeting in Geneva, where Kerry outlined human rights violations in Russian-annexed Crimea and eastern Ukraine. VOA State Department correspondent Pam Dockins reports from Geneva.
Video

Video Kerry Seeks Assurances of Russian Non-Interference in Ukraine

U.S. Secretary of State John Kerry has told his Russian counterpart, Sergei Lavrov, that his country could face further consequences to what he called its “already strained economy” if Moscow does not fully comply with a cease-fire in Ukraine. The two met, on Monday, on the sidelines of a U.N. Human Rights Council meeting in Geneva, where Kerry outlined human rights violations in Russian-annexed Crimea and eastern Ukraine. VOA State Department correspondent Pam Dockins reports from Geneva.
Video

Video Smartphones May Help in Diagnosing HIV

Diagnosing infections such as HIV requires expensive clinical tests, making the procedure too costly for many poor patients or those living in remote areas. But a new technology called lab-on-a-chip may make the tests more accessible to many. VOA’s George Putic reports.
Video

Video Afghan Refugees Complain of Harassment in Pakistan

Afghan officials have expressed concern over reports of a crackdown on Afghan refugees in Pakistan following the Peshawar school attack in December. Reports of mass arrests and police harassment coupled with fear of an uncertain future are making life difficult for a population that fled its homeland to escape war. VOA’s Ayesha Tanzeem reports from Islamabad.
Video

Video Ukrainian Volunteers Prepare to Defend Mariupol

Despite the ongoing ceasefire in Ukraine, soldiers in the city of Mariupol fear that pro-Russian separatists may be getting ready to attack. The separatists must take or encircle the city if they wish to gain land access to Crimea, which was annexed by Russia early last year. But Ukrainian forces, many of them volunteers, say they are determined to defend it. Patrick Wells reports from Mariupol.
Video

Video Moscow Restaurants Suffer in Bad Economy, Look for Opportunity

As low oil prices and Western sanctions force Russia's economy into recession, thousands of Moscow restaurants are expected to close their doors. Restaurant owners face rents tied to foreign currency, while rising food prices mean Russians are spending less when they dine out. One entrepreneur in Moscow has started a dinner kit delivery service for those who want to cook at home to save money but not skimp on quality. VOA's Daniel Schearf reports.
Video

Video US, Cuba Report Progress in Latest Talks to Restore Ties

The United States and Cuba say they have made progress in the second round of talks on restoring diplomatic relations more than 50 years after breaking off ties. Delegations from both sides met in Washington on Friday to work on opening embassies in Havana and Washington and iron out key obstacles to historic change. VOA’s Mary Alice Salinas reports from the State Department.
Video

Video Presidential Hopefuls Battle for Conservative Hearts and Minds

One after another, presumptive Republican presidential contenders auditioned for conservative support this week at the Conservative Political Action Conference held outside Washington. The rhetoric was tough as a large field of potential candidates tried to woo conservative support with red-meat attacks on President Barack Obama and Democrats in Congress. VOA Political Columnist Jim Malone takes a look.
Video

Video NYC's Restaurant Week: An Economic Boom in Fine Dining

New Yorkers take pride in setting world trends — in fashion, the arts and fine dining. The city’s famous biannual Restaurant Week plays a significant role in a booming tourism industry that sustains 359,000 jobs and generates $61 billion in yearly revenue. VOA's Ramon Taylor reports.
Video

Video Brookhaven at Cutting Edge of US Energy Research

Issues like the Keystone XL pipeline, fracking and instability in the Middle East are driving debate in the U.S. about making America energy independent. Recently, the American Energy Innovation Council urged Congress and the White House to make expanded energy research a priority. One beneficiary of increased energy spending would be the Brookhaven National Lab, where clean, renewable, efficient energy is the goal. VOA's Bernard Shusman reports.
Video

Video Southern US Cities Preserve Civil Rights Heritage to Boost Tourism

There has been a surge of interest in the American civil rights movement of the 1950s and '60s, thanks in part to the Hollywood motion picture "Selma." Five decades later, communities in the South are embracing the dark chapters of their past with hopes of luring tourism dollars. VOA's Chris Simkins reports.
Video

Video Deep Under Antarctic Ice Sheet, Life!

With the end of summer in the Southern hemisphere, the Antarctic research season is over. Scientists from Northern Illinois University are back in their laboratory after a 3-month expedition on the Ross Ice Shelf, the world’s largest floating ice sheet. As VOA’s Rosanne Skirble reports, they hope to find clues to explain the dynamics of the rapidly melting ice and its impact on sea level rise.
Video

Video Lao Dam Project Runs Into Opposition

A Lao dam project on a section of the Mekong River is drawing opposition from local fishermen, international environmental groups and neighboring countries. VOA's Say Mony visited the region to investigate the concerns. Colin Lovett narrates.

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

World Currencies

EUR
USD
0.8907
JPY
USD
119.77
GBP
USD
0.6496
CAD
USD
1.2492
INR
USD
61.941

Rates may not be current.