TEHRAN: During the week ending November 11, three vessels, used for floating storage in Iran, left the Persian Gulf for destinations in India and South Korea, according to Genscape. Floating storage is often used to leverage a rising oil price. However, Iran’s decision to start exporting from floating storage may indicate the country’s wish to take advantage of oil prices at current levels. As crude output continues to rise in parts of the world, the move may signify the country is preparing for backwardation in the oil price, where prompt prices are higher than those for future delivery.
Continuing oil production challenges are threatening Organization of the Petroleum Exporting Countries attempts to stabilize the crude prices. Meanwhile, Iran’s Ministry of Petroleum’s news service Shana said last week that the country had increased output in its attempts to recover its pre-sanction market share. President Hassan Rouhani recently opened three new oil fields in Western Iran. The development of the oil fields in North Azadegan, Yadavaran, and Yaran came a lot sooner than expected and will add 250,000 bpd to the volume of Iranian oil available for export, according to Shana citing the official opening ceremony.
All eyes are on OPEC and other major oil producing nations to finalize an agreement regarding oil supply during a meeting planned for November 30 in Vienna. Should a deal not be reached and the physical market remain oversupplied, it’s possible that the price of West Texas Intermediate could drop to the mid-$30 per barrel (Pb) range, said Again Capital Partner John Kilduff in commentary posted November 3 on CNBC.
Iranian exports to the India Subcontinent and East Asia have grown steadily from the start of the year and make up the majority of exports from the Persian Gulf state. Iranian daily exports increased from 1.3 million bpd at the start of the year to around 2.9 million bpd, the highest level since sanctions were lifted. On November 8, Devon a VLCC, which was sitting off Kharg Island, Iran, since the end September 2014, began heading toward Paradip, India. The vessel is carrying almost two million barrels of crude and is expected to arrive on November 18, according to Genscape.
Furthermore, Dore, a VLCC, came to Kharg Island from Assalouyeh, Iran, where it was berthed since March 23, 2015. There, it loaded oil and began to move toward New Mangalore, India, on October 26, carrying roughly 2 million barrels of oil. Finally, Destiny, a VLCC, left Assalouyeh, where it was berthed since January 20, 2015. It moved toward South Korea on October 26, carrying roughly two million barrels of oil.
