Denver — The global oil industry is growing more and more curious to find out how Iran is coping with the looming US sanctions which have already severely disrupted the country's oil exports.
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Iran is opting for a cat and mouse game for now, with the help of its oil tankers.
Iran's oil tankers are switching their transponders off in a bid to appear oblivious to global satellite tracking systems as the OPEC member finds a way to sell its crude.
Iran is also building stocks on its tankers as another line of defense along with significantly increasing its domestic refinery runs.
Focus has turned to the oil tankers owned by state-owned National Iranian Tanker Company, which operates 38 VLCCs, making it second largest operator of such supertankers, the first being Saudi Arabian tanker company Bahri which now operates 47 VLCCs.
Some NITC tankers are switching off their Automatic Identification System (AIS), an automated tracking system which reveals their position, according to S&P Global Platts trade flow software cFlow.
HIDE AND SEEK
Almost 11 Iranian oil tankers have had their transponders turned off these last few weeks, making it tricky to track Iran's crude oil exports.
VLCCs like Dino I, Diona, Navarz, Humanity have had their AIS data turned off since mid-September, making it tough to track where the shipments are going, data showed.
But tankers like Snow, Huge, Sea Cliff, Dream II, Happiness I and Deep Sea which had their transponders off last week have re-emerged on satellite tracking system this week -- all seen off the west coast of India. Recent tanker data had shown a sharp fall in exports to India, but the reappearance of these tankers may imply that flows to India may not be as low as preliminary data showed.
A similar ploy was used by Iran during 2011-2014 when it was also hit by sanctions.
Some tankers lose their signals due to weather and atmospheric issues but several analysts believe this trend of Iranian tankers is more to do with sanctions than climate.
Representatives at NITC were unavailable for comment.
Iran's crude and condensate exports have tapered off sharply since early May when US President Donald Trump withdrew from the Iran nuclear deal and reimposed sanctions on the country.
Iran's crude oil and condensate exports fell to 1.7 million b/d in September, a fall of almost 700,000 b/d from May, according to Platts estimates.
Iran is currently holding around 7 million-8 million barrels of crude and condensate on floating storage mainly off its main crude oil terminals, according to cFlow. This compares with levels of around 15 million-17 million barrels around three weeks ago, but the volume has fallen as some of those tankers turned off their transponders.
Analysts have said that the rise in Iran's oil storage along with its ghosts tankers show that the country's production has not yet been curtailed as much as exports have fallen.
Some analysts also said Iran is forced to store crude oil as it cannot easily close its taps, mainly because it needs the associated gas produced with crude oil to meet very high demand for natural gas and partly because of reservoir issues.
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 held some 50 million barrels of its crude and condensate in tankers during the curbs.
Iranian production has already begun to suffer in advance of the sanctions, falling to 3.6 million b/d in August, the lowest in more than two years, according to Platts data. Output is expected to fall even further in the coming months as US sanctions targeting Iran's oil sector kick in.
Analysts expect the US sanctions to eventually shut in around 1 million-1.7 million b/d or more of Iranian exports.
-- Eklavya Gupte, firstname.lastname@example.org
-- Edited by Irene Tang, email@example.com