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September loadings fall 12% to 1.70 million b/d

Flows to almost all key buyers drop

'Ghost' tankers complicate export volumes

Denver CO — Iranian oil exports dropped to a new low in September ahead of looming US sanctions, but some shipments not visible through vessel-tracking data are thought to be taking place.

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Total estimated export volumes on Aframaxes, Suezmaxes and VLCCs from Iranian ports sank by 11.5% to 1.7 million b/d in September from 1.92 million b/d in August, according to data from S&P Global Platts trade flow software cFlow. Around 1.5 million b/d of this total consists of crude while the remaining were all condensate volumes.

These are the lowest exports by Iran in at least two-and-a-half-years before the West lifted sanctions in January 2016 and show that its key customers are already making significant cuts to their Iranian imports before US secondary sanctions kick in on November 5.

While these numbers are compiled from publicly visible shipments that can be observed through vessel tracking, a number of clandestine deliveries may also still be happening, according to shipping and trading sources.

There is growing evidence of attempts by Iran to continue shipments to its key buyers while minimizing public visibility. Representatives at state-owned National Iranian Tanker Company were unavailable for comment.

KEY CUSTOMERS

Steep declines in Iranian exports are expected over the rest of this year as the second round of US sanctions, which target the oil sector, are implemented from November 5.

Recent Iranian oil exports by region

China, continued to remain the biggest buyer of Iranian crude despite the US sanctions, but flows fell 12.3% to 442,900 b/d last month.

Among Asian buyers, the biggest decline was observed in Japan, where imports from Iran dropped to 41,900 b/d from 147,581 b/d the previous month.

Shipments to India declined by 16.7% to 357,200 b/d as key Indian refiners are starting to reduce their dependence on Iran's oil.

Because of the lack of Automatic Identification System, or AIS, data on a number of tankers leaving Iranian oil terminals last month, almost 207,000 b/d is said to be on its way to unknown destinations.

The fall in flows to both China and India will be a huge concern for the OPEC member as it was hoping to rely on steady demand from these two customers to cope with the US sanctions.

In Europe the sharpest drop came in Greece, to 34,400 b/d in September from 98,677 b/d in August. Demand from Turkey and Spain for Iranian crude rose while exports to Italy and Croatia dipped.

Cepsa, a key buyer of Iranian crude, said it has ceased purchasing crude from OPEC's third largest producer from October onwards "in view of the current business environment in Iran" ahead of US sanctions.

LACK OF AIS DATA

Ships are required under international maritime law to use an AIS transponder to make their location publicly visible via satellite, but there is an increasing incidence of ships previously involved in Iranian crude exports apparently shutting off their transponders, keeping their location hidden, cFlow data indicated.

Around a dozen Iranian oil tankers have had their transponders possibly switched off last month, cFlow data showed, making it difficult to reliably track the volumes and destination of the country's exports.

Several tankers that were observed loading cargoes at Iranian ports in September subsequently disappeared from the AIS data for a week or more.

The Suezmax Stark I left an Iranian port with a 1-million-barrel crude cargo late September and traveled east, according to cFlow data. The tanker subsequently turned off its transponder, disappearing about 200 miles off the east coast of India and then reappearing unladen in the same location a week later before heading back to Iran.

In previous months, this very tanker made several voyages discharging Iranian crude in India.

Iran's efforts to obscure the location and destination of its tankers is not a new move and is likely to become more frequent when US sanctions begin in earnest on November 5.

Iran has also been building crude stocks on its tankers as another line of defense, and has significantly increased domestic refinery runs.

BUYERS OF IRANIAN CRUDE OIL AND CONDENSATES

Source: S&P Global Platts cFlow

Destination September August
China 442,900 505,033
India 357,200 428,710
Unknown 272,200 109,709
Turkey 139,100 99,387
Italy 138,400 167,452
Spain 102,767 65,000
UAE 71,200 165,516
South Korea 65,400 0
Japan 41,900 147,581
Greece 34,400 98,677
Croatia 32,667 34,516
Other Europe 0 33,677
Taiwan 0 64,323
Total 1,698,134 1,919,581

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

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

--Edited by Geetha Narayanasamy, geetha.narayanasamy@spglobal.com