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Analysis: Chinese, Indian appetite for Iran's oil climbs further

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Analysis: Chinese, Indian appetite for Iran's oil climbs further


20 mil barrels of crude sent to storage in China

Shipments averaged around 1.90 mil b/d in Oct 1-21

Iran luring buyers with cheap oil

London — China and India are showing few signs of wanting to wean themselves off Iran's heavy sour yet cheap crude oil.

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Iranian oil shipments to its two biggest customers have surged, with more oil going into inland storage in China as the OPEC member readies for US sanctions that kick in next week.

Iranian crude grades also continue to display their price competitiveness in these two markets that are proving more resistant to sanctions pressure.

But Iranian exports to other key buyers like South Korea, Japan and refiners in Europe have slid in the past three months as buyers there view the risk as far too great.

Flows to China in the first three weeks of October averaged 800,000 b/d from levels of around 600,000 b/d in September, preliminary tanker tracking data from S&P Global Platts trade flow software cFlow showed. Iranian oil exports to China in 2017 averaged around 602,509 b/d, Platts estimates.

Around half of this includes volumes going to Dalian in northeastern China, a popular storage hub in the region.

Sources have said that state-owned National Iranian Oil Company (NIOC) has leased almost 20 million-40 million barrels of storage capacity in Dalian in northeastern China.

Since early September, almost 20 million barrels or roughly 400,000 b/d of Iranian crude and condensates have been destined for Dalian, according to shipping data and sources.

Ten VLCCs - Derya, Serena, Hero II, Halti, Devon, Happiness I, Sea Cliff, Dore, Dino I and Dune -- have either reached or are on their way to Dalian, cFlow data showed.

"Iran, like any other major oil exporter, uses tank farms outside of its main land for storing oil in different regions," president of consultancy SVB Energy International Sara Vakhshouri said.

"NIOC has moved its storage tank farm hub from the port of Rotterdam to China. This will give closer and quicker access to its customers in Asia."

An executive from Sinopec, the single largest buyer of Iranian crude, said Tuesday it is in discussions with government authorities to make special arrangements on Iranian imports ahead of next week's US sanctions.


Recent Iranian oil volumes have remained rather high and resolute in the face of impending US sanctions compared to some analyst expectations.

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Tankers operated by the National Iranian Tanker Company have consistently switched off their tracking systems in recent months, making it arduous to accurately to tracks Iran's exports.

Iranian crude and condensate shipments in the first three weeks of October have averaged around 1.90-1.95 million b/d, provisional data from S&P Global Platts ship tracking service cFlow showed.

But sources said total volumes could even be a touch higher as clandestine oil deliveries from Iran continue, a practice that is confounding the global oil market, making it tricky to track the volumes and destinations of the Iran's exports.

Iranian oil exports in September and August were at 1.95 million b/d and 1.98 million b/d respectively, according to Platts estimates. Iran exported around 2.50 million b/d in May, the month in which the US withdrew from the Iran nuclear deal.

Representatives at NIOC and NITC were unavailable for comment.


Iranian crude exports to India have also climbed in the past two months despite statements by some Indian refiners that they would curb their Iranian imports.

More than 600,000 b/d of Iranian crude left for India in September and volumes are expected to be around 500,000 b/d last month, cFlow data showed.

Iranian crude exports to India in August and 2017 averaged 435,613b/d and 461,977 b/d respectively.

A number of Iranian oil tankers that recently discharged in India had their Automatic Identification System (AIS) data turned off at various moments, making them trickier to spot.

Two Indian refiners have also made nominations to import Iranian oil in November despite the threat of sanctions.

India has been under pressure from the US government to slash its Iranian oil imports. The two countries have been involved in high-stakes negotiations in the past two months, but Indian imports have accounted for almost 30% of Iranian crude flows during this period.

The US State Department admitted this week that it is in the process of considering potential sanctions relief for some countries that significantly cut their Iranian oil imports.

"The US is in the midst of an internal process to consider [significant reduction exemption] waivers for individual countries," a spokeswoman said.

US sanctions on Iran's oil buyers snap back Monday, forcing key importing countries like China, India, Turkey, South Korea and Japan to either make major cuts and seek waivers, or risk getting blocked from the US financial system.

--Eklavya Gupte,

--Jack Jordan,

--Edited by Jonathan Fox,