London — Iranian oil exports, which have been laboring under US sanctions since late last year, have recovered close to prior levels, supported by unflinching demand from China and South Korea, data from shipping sources and provisional tanker tracking data showed Tuesday.
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Register NowCrude and condensate shipments from the Persian Gulf producer surged 12% to 1.70 million b/d in March, the highest since October, as key buyers scrambled to pick up more volumes before US sanctions waivers expire in early May.
Exports could fall in the coming months if the US tightens its grip on Iran crude purchases from those eight countries given special treatment, according to analysts.
The market is still searching for clarity, but many believe Iran's biggest customers will likely get an extension to the waivers.
FALLING INVENTORIES
Exports slumped to 1.08 million b/d in November a fall of almost 1.34 million b/d since May when the US withdrew from the Iran nuclear deal, according to Platts cFlow trade flow data showed. But since November volumes have recovered by 60% surprising many on the market.
Sources noted the rise in exports comes despite a huge fall in Iranian crude production because the OPEC member has been utilizing barrels from storage.
Data from Ursa, a geospatial analytics startup, which tracks oil inventories using satellite data, shows that Iran's crude inventories have fallen by almost 25% since early January, led by Kharg Island, the country's main export terminal, which saw a 30% decline in March.
"This suggests Iran's oil production has fallen below exports, forcing barrels from storage to cover any shortfall," said Geoffrey Craig, an energy analyst at Ursa. "With the US granting exemptions to some of Iran's biggest customers, exports seem to have fared better than anticipated."
Iran produced 2.69 million b/d of crude in March, according to the recent S&P Global Platts OPEC Survey, a fall of 280,000 b/d from November.
China, India and South Korea all significantly increased purchases of Iranian oil as supplies of particularly heavy to medium crude have tightened sharply in the past few months.
Supply of medium, heavy sour crudes remain a key concern for Asian refiners due to a lack of volumes from Venezuela, Iran and other major sources of heavy sour crude.
Demand for Iranian crude in the world's largest crude importer has rebounded in recent months. Flows to China averaged 627,710 b/d last month from levels of 571,464 b/d in February.
Indian buying interest in March was up with around 350,000 b/d sailing there, a rise of over 70,000 b/d from February.
US UNCERTAINTY
Most analysts expect at least four of Iran's top crude and condensate buyers to get an extension of US waivers, albeit at lower levels.
China, India, Turkey and South Korea are likely to be granted one while exemptions for Italy, Greece, Japan and Taiwan are likely to halt, according to a recent survey carried out by Platts, which polled a dozen analysts closely tracking Iranian oil sanctions policy.
Italy, Greece and Taiwan have not imported Iranian oil since October despite having waivers.
The US administration insists that it is committed to "zeroing out" Iranian crude oil exports but most analysts remain skeptical that exports would fall to this number.
"We don't expect Iran oil exports to reach to actual zero. Zero Iran oil export poses a serious threat against the security of oil flow, especially from the Persian Gulf," said Sara Vakshouri, president of SVB Energy International.
Vakshouri estimated Iran's oil exports to average 470,000-500,000 b/d if only China, India and Turkey receive exemptions. "If Japan and South Korea also succeed to receive Iran oil import waivers, Iran oil export could reach to 670,000-850,000 b/d," she added.
A moderate number of Iran's state-owned oil tankers continue to not broadcasting their geographical positions, making it tricky to ascertain the exact amount of the country's seaborne crude exports.
Iran is also starting to holding crude and condensates on tankers as floating storage. Representatives at Iran's oil ministry declined to comment.
-- Eklavya Gupte, eklavya.gupte@spglobal.com
-- Edited by Richard Rubin, newsdesk@spglobal.com