Sanctions slash Tehran shipments from 2.4m bpd to just 570,000 bpd
IRANIAN crude oil exports fell to just 570,000 barrels per day in July, representing less than a quarter of the average 2.4m bpd shipped in 2011, according to preliminary data from Lloyd’s List Intelligence.
The figure is also almost half the 1.09m bpd that Iran exported in June, highlighting the extent to which tighter US and European Union sanctions have squeezed Tehran since they came into force on July 1.
For the international tanker market, the decline is equivalent to daily exports dropping from more than one very large crude carrier shipment of around 2m barrels to less than one aframax cargo, which averages close to 600,000 barrels.
Lloyd’s List Intelligence’s weekly Iran report, released as the market closed on Friday, showed that only nine VLCCs were on the water carrying Iranian oil.
These comprised six Iranian NITC tankers shipping crude to China and three Japanese vessels on domestic runs – vessels owned by MOL, K Line and Iino Kaiun Kaisha that have sovereign guarantee cover to carry Iranian oil, despite international insurance restrictions.
The International Energy Agency reported last week that global imports of Iranian oil in July – and therefore probably its crude exports in June – fell to 1m barrels per day from 1.7m bpd the month before.
Although other Middle Eastern producers such as Saudi Arabia have stepped to fill the gap created in the international market from reduced Iranian exports, the effects of the sanctions come at a time when the tanker market desperately needs more employment.
One of the biggest knock-on effects of the sanctions, as reported by Lloyd’s List earlier this month, is that there has been a significant drop in the amount of oil discharged at the Egyptian Red Sea port of Ain Sukhna and pumped along the Suez-Mediterranean pipeline to Sidi Kerir.
In 2011, Iranian and Saudi Arabian oil accounted for almost all crude being pumped through the pipeline and although Iraqi volumes into Ain Sukhna have risen in the last three months or so, this has not been enough to plug the shortfall.
According to the Lloyd’s List Intelligence database, the drop in cargo loadings at Sidi Kerir in the first six months of this year compared to the second half of 2011 was equivalent to a drop of 14 aframax cargoes a month.
For an abysmal Mediterranean tanker market, those cargoes are sorely missed as the fleet continues to grow, due to newbuildings entering service. Meanwhile, Syrian cargoes have been taken out of the equation as the war-torn country is also now subject to international sanctions.
Even for the VLCC market, the loss of cargo is significant, particularly for Asian operators.
Wei Jiafu, head of China’s largest shipowning company Cosco, has urged Beijing to consider sovereign cover to allow its domestic fleet to carry Iranian oil, following the precedent set by its neighbour Japan.
However, the latest bill passed by US Congress and likely to be signed by President Barack Obama seeks to halt all business with Iran, barring any company or person providing shipping services with the Islamic Republic from trading with the US or having access to its financial system.
The IEA report said the US financial authorities had already identified Chinese, Iraqi and UK banks that allegedly breach existing sanctions against Iran’s oil industry.
“A key factor in oil-market direction will be Iran’s own response to the tightening sanctions noose and narrowing export opportunities. The country may soon run out of storage capacity in which to stash unsold crude cargoes,” the IEA said.
“This could lead it to a more accommodating foreign and nuclear policy, eventually paving the way for an easing of sanctions, or it could incentivise [Iran] to more aggressively discount barrels in Asia and elsewhere.”
Every month our analyst Karla Calderas-Mendez shares her specialist insight into oil tanker markets in our Lloyd’s List Intelligence Tanker Review. Sign up here to receive the review.
Data for this article is provided by Lloyd’s List Intelligence Tankers Channel.
You need to monitor the world’s tanker fleet and crude oil flows in real-time but you also need intelligent insight that makes sense of current market conditions. Our oil-specific data and expert sector analysis will help you make the right business and investment decisions in a volatile market.
To find out how we can help you monitor oil import and export trends sign up for a trial