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Analysis: Iran's oil exports show surprise rebound in H1 Sep

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Analysis: Iran's oil exports show surprise rebound in H1 Sep

Highlights

Sep 1-15 oil exports rise to 1.69 mil b/d

Aug 1-15 loadings averaged 1.48 mil b/d

Exports averaged 1.92 mil b/d in Aug

Key buyers start to reduce imports

Iran starts to build barrels at sea

London — Oil exports from Iran showed a surprise rebound in the first half of September from the same period in August, preliminary tanker tracking data showed, but loadings still remain below the average exports of August as key buyers start to reduce dependence on Iran's oil.

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This is a timely reminder to the market that the sharp downward trend in Iran's crude supply may not be so straightforward and that moving forward, demand from India, China and Europe will be pivotal. Iran has also started to build storage on tankers as it tries to cope with a fall in its exports.

Initial estimates gathered by S&P Global Platts trade flow software cFlow suggest Iranian crude and condensate exports averaged 1.69 million b/d in the first 15 days of September from 1.48 million b/d in the same period of last month.

However, crude and condensate exports averaged 1.92 million b/d in August from 2.32 million b/d in July, Platts estimates show.

The data showed that out of 1.69 million b/d exported in the first half of September, around 1.5 million b/d consisted of crude, while condensate volumes made up the rest.

Vessel-tracking data for Iranian exports may gradually become less reliable in the run-up to the sanctions deadline as importers find ways to continue their purchases on a more clandestine basis while staying out of the political conflict.

Ship-to-ship cargo transfers or shutting off or tampering with the automatic identification system (AIS) used to locate vessels help disguise exports in this way, and these methods are thought to have been used during the last sanctions period.

FLOWS TO CHINA, EUROPE RISE

Exports to China during the first half of September jumped to 813,333 b/d from 466,333 b/d over August 1-15 and 505,033 b/d over August 1-31.

Flows to India plummeted in the first half of September from the previous month though sources said imports from India's state-owned refiners should recover towards the second half of the month.

Exports to India over September 1-15 fell to 114,267 b/d from 134,267 b/d the same period last month. But flows to India for the whole of August averaged 428,710 b/d, Platts estimates showed.

Imports from India, the second-largest buyer of Iranian crude, are expected to fall further this year, after coming under pressure from the US government to reduce its reliance on Tehran's oil.

Flows from Iran to Europe in the first half of September were up strongly at 615,180 b/d from 498,702 b/d in the first half of August. Italian, Turkish and Spanish demand stayed firm during this period but exports are expected to fall sharply once sanctions snap back into place in early November.

Shipping and trading sources said recent export numbers show the market may have underestimated the extent to which its oil exports would be affected even before the sanctions came into place.

Analysts expect the sanctions to eventually shut in up to 1 million-1.40 million b/d or more of Iranian crude exports.

BUILDING BARRELS AT SEA

The fall in Iranian crude loadings has, however, coincided with an increase in storage as Iran starts to build stocks on tankers.

Iran has already built around 15 million-17 million barrels of crude and condensates on tankers owned by the National Iranian Tanker Company, according to Platts trade flow software cFlow.

According to cFlow data and trading sources, around eight VLCCs and one Suezmax have accumulated off Iran's main crude oil terminals, Kharg Island and Soroosh, and also off the coast of the United Arab Emirates.

Some analysts have expressed surprise at how much floating storage Iran is already building up, which shows production has not yet been curtailed as much as exports have fallen.

Iran resorted to floating storage for its crude under the previous Western sanctions on its oil which ran from 2011 to 2016. At its height, Iran was holding some 50 million barrels of its crude and condensate in tankers during the curbs.

Iran has also started building domestic inland storage while refinery runs in the country have been picking up in recent months.

--Eklavya Gupte, eklavya.gupte@spglobal.com

--Jack Jordan, jack.jordan@spglobal.com

--Edited by Jonathan Fox, jonathan.fox@spglobal.com