Iran Chasing Market Share Pares Crude Oil Shipping Rates
$OIL, $USO
Iran has started ramping up Crude Oil production output, and is lowering shipping rates as it aims to regain the market share lost under Western sanctions.
The shipment rate of Iranian Crude has been based on that of the main competition, Saudi Arabian Crude.
Iran’s heavy Crude traded at a discount of around 6c bbl to Saudi Arabia’s Arab Medium Crude throughout Y 2015, according to Platts published data.
After the 6 world powers lifted the sanctions in January, Tehran cut the price of its Crude Oil to a 10c discount in January and February. The discount was further widened to 20c for March-loading. The gap is the widest since December 2008, according to the report.
After the lifting of the sanctions, Iran decided to ramp up output by 500,000 BPD, and now aims to increase it by an additional 500,000 bbls. Tehran wants to recover market share and boost Crude Oil exports to finance the rebuilding of its economy.
Iran has started shipping Crude to Europe and is now actively targeting buyers in Asia.
Iran’s price cuts are weighing on the recovering international Crude market.
US WTI Crude touched 41 bbl at one point, rebounding from the its February lows at 26. The increase is attributed largely to speculation of a production freeze by 4 big producing countries, including Saudi Arabia and Russia, on the condition that others follow, Iran refused.
Crude Oil prices are still less than 50% the level seen 2 years ago, when it fetched more than 100 bbl. Tight (shale) Oil producers in the US have been slow to reduce output, while Iran’s increased production is adding to the world wide supply glut.
Oil-producing nations are slated to meet again 17 April to discuss a broader output policy. But Iranian Oil Minister Bijan Zanganeh has refused to agree to such a pact until the country’s production reaches 4-M BPD.
Iran recorded daily output of 3.88-M BPD in Y 2005, commanding a 13% market share, the 2nd-largest among OPEC members. Its production declined under sanctions, totaling less than 2.9-M BPS in Y 2015, with its market share falling to about 9%.
Stay tuned…
HeffX-LTN
Paul Ebeling
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