With Iran poised to resume usual business ties with the world under a historic nuclear deal, Tehran is set to target India, Asia’s fastest-growing major oil market, and old partners in Europe with hundreds of thousands of barrels of its crude.
Iran expects the UN nuclear watchdog to confirm on Friday it has curtailed its nuclear programme, paving the way for the unfreezing of billions of dollars of assets and an end to bans that have crippled its oil exports.
Tehran plans to lift exports by 500,000 barrels per day (bpd) post-sanctions and gradually raise shipments by the same amount again, adding to a glut of global oil and likely putting more pressure on oil prices which have already dropped 70% since 2014 to around $30 per barrel.
Iran has 22 Very Large Crude Carriers (VLCC) floating off its coast, with 13 fully or almost fully loaded, mapping data on Thomson Reuters’ Eikon showed, carrying enough crude to meet India’s import needs for almost a week.
A senior Iranian source close to supply negotiations said that the country - which has the world’s fourth-biggest proven oil reserves - was targeting India as its main destination for crude.
Iran hopes to raise its exports to India by 200,000 bpd, up from the 260,000 bpd currently shipped under sanctions’ restrictions, the official said.
At the right price, Indian refiners said they were keen to import more from Iran, as the country’s demand for fuel soars on the back of 10% annual growth in car sales, a rate that is now faster than China’s.
The Iranian official said there was not much room for major export increases to China, South Korea or Japan due to slowing demand and also because of a shift there towards more non-Middle East crudes.
Old European partners
Iran already trades limited amounts of oil mainly with Asian buyers legitimately under sanctions, but its crude exports have fallen to just over 1m bpd, down from a peak of over 3m bpd in 2011, pre-sanctions.
The Iranian official said Tehran planned to revive supply deals with European partners in order to ramp up exports.
Shipping industry association Bimco confirmed that European clients would be among the first post-sanction clients.
“Former clients of Iran are the ones who are likely to return as buyers... Italy, Spain and Greece were the top EU importers in 2011,” said Peter Sand, BIMCO’s chief shipping analyst.
Italy’s ENI, Spain’s Repsol and France’s Total were some of the companies with the biggest delegations at a conference in Tehran last November, during which Iran published new terms for foreign oil investors.
Cut-throat market
In a cut-throat market, Iran may also find it difficult to sell its oil as the heavy grades it mostly offers are in low demand.
Latin American suppliers who produce similar heavy crudes have been seeking new buyers in Asia.
Within the Middle East, traders said Iran’s main competitor would be Iraq, which has successfully returned to Asian markets in recent years, with exports rising above 3.5m bpd.
In Europe, traders said Iran’s crude would compete mainly with Russian Urals grades, which are competitively priced.
In China and India, strong passenger car sales are fuelling gasoline demand, while a slowdown in Asia’s heavy industries means slower demand for diesel, which heavy crudes are often used to produce.
Iran does have light crudes, but needs them for itself to reduce gasoline imports.
Either way, Iran adding to an oversupplied global oil market is bound to put more pressure on prices.