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Iran crude oil exports to China set to fall in January

Oil&Gas Materials 14 December 2011 18:35 (UTC +04:00)
Iran's January crude exports to China's Sinopec Corp are set to fall by around a third from December as they haggle over oil supplies for 2012, Reuters reported on Wednesday with reference to Chinese industry sources.
Iran crude oil exports to China set to fall in January

Iran's January crude exports to China's Sinopec Corp are set to fall by around a third from December as they haggle over oil supplies for 2012, Reuters reported on Wednesday with reference to Chinese industry sources.

The contract dispute with Chinese buyers is one of several likely to face the world's fifth largest crude exporter: Iran is trying to sell its biggest Asian customers oil at higher prices and on tougher terms, even as it faces the prospect of fewer sales as Western nations mull sanctioning its economic lifeline.

Sinopec, Asia's largest refiner and Iran's biggest customer, receives crude supplies from Iran via its trading arm, Unipec, and through another deal with Chinese state oil trader Zhuhai Zhenrong Corp.

Unipec is set to receive 165,000 barrels per day less of Iranian crude, the sources said. That amount is about a third of the roughly 500,000 bpd of Iranian crude and condensate that Sinopec is buying for 2011.

"Our lifting will be nearly zero next month," said Chinese industry source.

The supply cut came as the United States looks to increase sanctions on Iran over its nuclear programme. A U.S. Congress panel on Monday agreed to impose new financial sanctions on Iran over its nuclear programme, and hopes to pass the legislation this week. The measures, however, allow countries allied to the United States to seek exemptions.

The National Iranian Oil Company (NIOC) and Unipec have so far failed to agree on a deal for about 260,000 bpd of Iranian oil supply for next year.

The Iranians want higher prices for some of the crude and a shorter payment period.

"I don't understand why both parties can't overcome these small hurdles at this point of time. Iran needs China the biggest oil buyer, China needs Iranian oil," said a senior Chinese crude oil trader.

Due to the dispute, all South Pars condensate supplies will be suspended for January loadings as NIOC has asked for a smaller discount to the benchmark Oman/Dubai quotes than the minus $5 a barrel Sinopec paid for this year's supply.

NIOC believes its 2011 offers were too generous. Sinopec wanted a minus $6 per barrel discount, the Chinese officials said.

"The stoppage of condensate means Sinopec needs to look for alternative supplies, some other type of light crude," one official said.

NIOC has also asked Chinese buyers to quicken the payment period to 60 days from the current 90 days, which several Sinopec plants have refused to accept. The January supply cut only affects the loadings handled by Unipec, while the remaining part of about 260,000-bpd lifted by Zhuhai Zhenrong Corp will stay normal.

"Sinopec's volumes were cut, but Zhenrong got full volumes, breaking the alliance between the two Chinese buyers," said an oil trader with a Western trading house.


Edited by: S. Isayev

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