Iranian crude flows to Singapore up sharply in July on brief US sanctions relief

Iranian crude flows to Singapore rose sharply in July following a temporary reopening of the Strait of Hormuz in late June and a brief US sanctions waiver on Iranian oil trade.

Iranian crude arrivals at ship-to-ship transfer areas near Singapore reached 36.2 million barrels in July as of July 20, up from 5 million barrels in June and 18.1 million barrels in May, according to S&P Global Commodities at Sea data.

The flows picked up after the US and Iran reached an interim agreement in mid-June, with Washington issuing a general license on June 22 to authorize Iranian oil trade through Aug. 21. The license was, however, revoked on July 7, after renewed attacks on commercial shipping in the Strait of Hormuz.

Iranian crude arrivals to STS locations or offshore storage areas near Singapore have exceeded 10 million barrels per week since the week starting June 29, according to CAS data.

This followed three weeks of zero Iranian crude discharge and only 3 million barrels for the week starting June 1, before the interim US-Iran agreement, CAS data showed.

For the week starting July 20, about 12.3 million barrels are in transit to Singapore, according to CAS data.

The surge in Iranian barrels coincided with significant pressure on Asia's physical sour crude market. The front-month Platts Dubai cash-futures spread averaged a $1.61/b discount over July 1-17, down $4.16/b from a $2.55/b premium in June.

Singapore's crude oil imports more than tripled on the week over July 9-15, rising by 281% to 1.53 million metric tons, with Middle Eastern crude accounting for more than half the total imports, Enterprise Singapore data showed. This brought the average to 135,370 mt/day over July 1-15, up from 122,217 mt/d in June.

The waters around Singapore and Malaysia are commonly used for STS transfers, which facilitate sensitive cargo logistics before delivery to buyers, particularly in China.

Shandong-based sources noted that the Iranian crude offer for August delivery is at a discount of about $3/b to ICE Brent futures on a DES Shandong basis, as of July 17.

Markets are closely watching whether Middle East Gulf producers can continue shipping cargoes safely and on schedule through the Strait of Hormuz amid the recent escalation. Several Asian refiners have ramped up their purchases of arbitrage crudes in recent days.