Iran oil exports fall as sanctions take toll

Reuters – Fri, Mar 23, 2012

http://en-maktoob.news.yahoo.com/1-iranian-oil-exports-drop-march-141746748.html

LONDON, March 23 (Reuters) - Iranian oil exports have fallen substantially in March, industry sources said on Friday, as some buyers stop or scale back purchases because of sanctions aimed at slowing Tehran's nuclear programme.

Crude exports from Iran appear to have fallen this month by around 300,000 barrels per day (bpd), or 14 percent, according to estimates from industry consultant Petrologistics and a leading European oil company. A source at a third oil company said it too had noted a decline in Iranian exports.

It is the first sizeable drop in oil shipments from the OPEC producer since the European Union announced in January plans to embargo Iran's crude from July and Washington and Brussels sanctioned Iran's central bank.

Oil prices rose on the news, with Brent crude  jumping to as high as $127.06 a barrel, up $3.96 and just $20 short of an all-time high reached in 2008. Prices later eased to $125 a barrel. "This is fundamentally very bullish," said Mike Wittner, head of commodities research at Societe Generale in the United States. "I think Iranian exports are going to go down much more, as the sanctions bite. It's a logical reaction for the market to go up on this."

According to Petrologistics, a Geneva-based oil industry consultant, Iranian exports may amount to 1.9 million bpd in March, down from about 2.2 million bpd in Feb.

A source at an oil company which still deals in Iranian crude said the evidence pointed to an overall drop in shipments in March, seeing a decline of at least 300,000 bpd mainly because European customers are taking less.

European buyers of Iranian crude including France's Total have already stopped buying the oil, which is subject to European Union sanctions from July 1. Royal Dutch Shell, is scaling back.

"We are taking less and less - very few barrels," said an official with a European oil company, until earlier this year one of the larger EU buyers of Iranian crude.  A lengthening line of tankers at Iran's main export terminal Kharg Island signalled further evidence that Iran is struggling to maintain exports.

A shipping source with knowledge of operations at Kharg said tankers were being deployed to act as floating storage because onshore tanks were close to capacity.

"What we have been told is that shore tanks are at critical situation and the vessels are coming to load and going to anchorage awaiting instructions," the source said. "They are being used as floating storage."

Brokerage ICAP said that the National Iranian Tanker Company (NITC) was seen this week to be using six very large crude carriers to store crude -- three short-term and three long-term -- two more than last week.

TANKER TRACKING

A trading source at another European oil firm also estimated Iranian exports were falling from levels earlier in the year.  "I do see the month to date lower than February," the source said. "I just don't know where March will finish."

Petrologistics is one of a number of companies which estimates oil output by tracking tanker shipments, because Iran, like many big oil exporters, does not routinely disclose how much it is supplying on a timely basis.

Iran's oil exports are difficult to track and, like those of other major exporters, they can fluctuate week by week. With a week to go in March, it is possible the picture may change.

"We are struggling to get the numbers nailed down," said an industry official.

Oil prices have climbed from around $107 a barrel at the end of 2011 as the tighter Western sanctions on Iran threaten to choke off its exports.

"There are definitely signs that buyers of Iranian crude are shy about buying and have been, in their search for replacement crude, bidding up the price," said Edward Morse, global head of commodities research at Citigroup.

That means, as one industry official noted, that higher prices are compensating Iran for the loss of exports and that measures designed to punish it mean it now sells fewer barrels at higher prices.

Some oil industry officials say Saudi Arabia is increasing shipments to compensate for lower Iranian supplies and to lower prices, which may lead to Saudi output climbing above 10 million bpd.

Saudi Arabia said on Tuesday its March output was around 9.9 million bpd, its highest in decades.  An Iranian oil official, asked on Friday to comment on whether exports had fallen, referred to remarks earlier in March by Iranian Oil Minister Rostam Qasemi who said shipments were unchanged from last year.

(additional reporting by Christopher Johnson, Peg Mackey, Luke Pachymuthu, Jonathan Saul, Matthew Robinson and Simon Falush; editing by Richard Mably)