After sanctions: as Iranian oil comes back to Europe

“Business as usual”

The world’s largest independent oil trader Vitol Group began its purchases of Iranian oil. Company President Ian Taylor in an interview with Bloomberg on Monday confirmed: “we actually buy a bit of everything, a little oil, a little bit of condensate, it is business as usual,” explained Taylor.

Iran received an opportunity to sell oil to European customers from mid-January, after the lifting of international sanctions. Last week the authorities first assessed the volume of oil that goes to European consumers. The oil Minister of Iran Bijan Zanganeh said Iranian profile edition Shana that Iran plans to supply Europe with about 300 thousand barrels. of oil per day.

Zanganeh said that national Iranian oil company, agreed to supply 160 thousand Barr. on the day of the French Total. With Italian Eni are negotiating on the supply of 100 thousand barrels. oil. The contract for another 60-70 thousand barrels. on the day, according to Iranian Minister, may be concluded with the Italian oil refiner Saras.

The first delivery of oil after the lifting of sanctions took place in late January, reported Reuters, citing senior sources in Iran. Then were allegedly sold six large tankers with delivery in February, three of them in Europe. The first buyer of Iranian oil was the company Litasco — the trading division of LUKOIL — Iranian oil will be put to the company-owned refinery Petrotel in Romania. The company Vagit Alekperov, as declared to “Interfax” Deputy Minister of energy of Russia Anatoly Yanovsky, discussing with Iran the possibility of swap supplies of oil — LUKOIL under this scheme to supply Iran with oil fields in the Caspian sea, while Iran will provide the Russian company with the same amount of oil in the Persian Gulf.

On Friday The Wall Street Journal reported that in the terminal port city Bandar-e mahshahr Iran oil loaded on the tanker Swiss Glencore Xstrata PLC (the company has not officially confirmed this information).

How was Iran under sanctions

Estimated to Bloomberg, in 2011 Iran was producing about 3.6 million barrels. a day. In 2012, when it began operating ban on oil exports from Iran, oil production has plummeted to its lowest in 25 years to 2.7 million barrels. a day. In 2015 the volume of oil production of the Islamic Republic averaged about 2.8 million barrels. a day. Devoid of access to Western consumers, Tehran was selling small volumes of oil companies from China, India, Japan, South Korea and Turkey.

While not a competitor

According to estimates of Bloomberg, the total supply of Iranian oil in Europe in February reached 136 thousand barrels. a day — about a quarter of the “docaction” supplies in the region (according to Petromatrix, in European countries, except for Turkey, Iran in 2012 exported 550 thousand Barr. a day, satisfying just under 5% of their raw material requirements). According to Taylor, Iran will become a significant player in the global market — the company believes that during the first half of 2016, the country will be put on the market by 500 thousand barrels. of oil per day, and in the second half of the volume of daily oil exports will increase to 700 thousand Barr.

Of these 500 thousand Barr. slightly more than half will go to Europe, implies in a conversation with a senior analyst on oil and gas “URALSIB capital” Alexei Kokin. Assessment of the energy market Stratfor analyst Michael Oskoui closest to the Russian Urals brand of oil is Iranian oil. But this influx has long been expected by the market and the significant impact it will have, says Kokin.

A week and a half ago Vice-President “Transneft” Sergey Andronov stated in an interview with “Netickampis” that the export of Russian oil by all methods of delivery in Europe this year are planned at $ 135.5 million, the average daily volume of Russian oil supplies to Europe in 2016 will be approximately 370 thousand tons per day, while Iran’s shipments — roughly 42 tons per day.

Due to direct competition with the new player, expected in November, a senior analyst at consulting company KBC Advanced Technologies Ehsan Ul-Haq, Russia may lose in 2016 from the return of Iran’s $153 million (0.5% of annual income from the sale of hydrocarbons).

Battle of the benchmarks

Representatives of the Russian authorities, assuming in their forecasts further drop in oil prices, usually indicated as one of the reasons for the return of Iran to the world market. This is, in particular, in mid-December, said Finance Minister Anton Siluanov.

Although the Iranian authorities and assure that it is not going “to enter into something of a price war,” as said a month ago the head of the international relations Department of the National Iranian oil company Mohsen Qamsari, a country on the oil market in one way or another affect the behavior of other oil-producing countries.

In particular, Saudi Saudi Aramco, establishing official prices for its oil for different regions for March, offered to consumers from Mediterranean countries the discount from $0.20 to $0,75, depending on the variety. It is the European Mediterranean Iran considers as one of its key markets.

The Iranian response — entering the market in March-April with a new grade of oil, West Karun, the Agency reported Bloomberg, citing a source at the National Iranian oil company. A new grade of heavy oil, said Bloomberg chief analyst of the oil market in IHS Viktor Noise will compete with Iraqi oil Basrah Heavy. Iran expects that the new type of oil will be in demand in the Asian markets (especially India), and also in some European countries (e.g., Spain). On “native” for the new benchmark the West Qarun field can be up to 1 million barrels. a day.

When expected volumes of supply to Europe, Iranian oil still cannot be considered as a competitor for Russian and will have no impact on the price of the Urals, says Kokin. However, the discounting of prices by the Saudis caused including competition with Iran, had an effect on Russian positions.

The expansion of Saudi Arabia to the European markets (in October, for example, it became known about the first shipments of raw materials from Kingdom to Poland) made Moscow nervous. Russian energy Minister Alexander Novak have called out Saudi oil to the Eastern European markets example of “fierce competition” and head of “Rosneft” Igor Sechin said that, trying to gain a foothold in Poland, Saudi Arabia “active damping”. The Reuters source in the Russian government in November has promised European partners a new discounts on Urals.