For now Iran unlikely to return to pre-sanction oil export levels

Oil&Gas Materials 2 December 2013 18:04 (UTC +04:00)

Baku, Azerbaijan, Dec. 2

By Aygun Badalova - Trend:

Iran's return to pre-sanction export levels of 2.5 million barrels per day (mbpd) is highly unlikely, for now as it is doubtful Asian importers would risk angering the U.S. by boosting imports significantly, the analysts of Global Energy Studies Centre (CGES) believe.

"The interim deal between Iran and the P5+1 allows for purchases of Iranian oil to remain at their current levels of approximately 1 mbpd (according to US estimates) instead of forcing further reductions," CGES said in its report.

However, according to CGES, the oil sanctions regime and the EU embargo will remain in place and therefore the volume of Iranian oil available will remain largely unchanged over at least the next six months.

The U.S. and EU sanctions have slashed Iran's oil exports to around 1 mbpd from 2.5 mbpd before they were imposed.

In the short term, CGES's analysts believe, Iranian exports may receive a limited boost from October levels - which had fallen to less than 800,000 barrels per day (bpd) - as the remaining buyers of the country's crude feel less pressure to reduce their imports, especially since they have done so in October.

"Indian refiners in particular could increase their imports, as EU shipping and insurance sanctions against Iran have been suspended. The removal of these restrictions will enable them to import their full allotments, but not to purchase more than their contracted volumes," CGES's report said.

Iran will probably not ramp up production soon, since 37 million barrels are stored in tankers that can slowly be released into the market, CGES believes.

Last week the U.S. State Department extended six-month Iran sanctions waivers to China, India, South Korea and other countries in exchange for their reducing purchases of Iranian crude oil earlier this year.

According to Reuters' statistics, Iran's top four leading oil buyers (China, Japan, India, and South Korea) decreased their imports from Iran by 23 per cent (1,096 mbpd in 2012, compared to 1,428 mpbd in 2011). China imported 438,000 bpd of Iran's crude in 2012 (21 per cent less than in 2011), Japan dropped to 189,000 bpd in 2012 (40 per cent drop since 2011), India dropped by 1.7 per cent, importing 315,000 bpd compared to 321,000 bpd in 2011, while South Korea imported 153,000 bpd compared to 239,000 bpd in 2011 (23 per cent drop).