Iran's private sector can succeed in buying, selling crude oil

Oil&Gas Materials 20 August 2020 17:27 (UTC +04:00)
Iran's private sector can succeed in buying, selling crude oil

BAKU, Azerbaijan, August 20

By Elnur Baghishov – Trend:

The buy/sell operations of crude oil in Iran can be successful if they are carried out by the private sector, former Iranian representative at OPEC Mohammad Ali Khatibi told Trend.

According to Khatibi, in this case, the buy/sell operations of crude oil will be more transparent.

"In general, the crude oil is traded in the world through the energy exchanges. The exchanges are mostly private, while states just control their activities," he said.

Khatibi noted several peculiarities in the selling of contracts of National Iranian Oil Company (NIOC) in connection with the sale of crude oil in Iran.

Standard parallel salaf contracts for heavy crude oil of NIOC were planned for sale at the Iranian Energy Exchange (IRENEX) on August 16, but later the sale was stopped.

The standard parallel salaf is an Islamic contract similar to ‘futures’ contract, with the difference being that the contract’s total price must be paid in advance.

"The oil contracts sold to citizens can be bought by Iranian refineries. However, at present, Iranian refineries do not need these contracts, because they can receive oil directly from NIOC," Khatibi said.

He stressed that these contracts can be successful if the problems with Iran's crude oil exports are eliminated.

Khatibi noted that the sale of contracts related to crude oil will be carried out in rials, while its price will be set in dollars. For example, if the price of crude oil is $44 per barrel, this amount will be calculated based at the NIMA exchange rate.

"There will be two risks in this issue. The first there is fluctuation in oil prices, and second is the fluctuation in the foreign currency rates in Iran," he added.

He emphasized that delivery of oil sold under the contract to the owners will begin in two years. Therefore, the concerns of customers, namely citizens, related to the purchase of documents should be addressed.

Iran's crude oil exports fell sharply in 2018 as a result of new US sanctions against Iran