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Exclusive: China Shifts to Iranian Tankers to keep Oil Flowing Amid U.S. Sanctions – Sources

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Iran and China agree to $600 billion
  • Exclusive: China Shifts to Iranian Tankers to keep Oil Flowing Amid U.S. Sanctions – Sources

Chinese buyers of Iranian oil are starting to shift their cargoes to vessels owned by National Iranian Tanker Co (NITC) for nearly all of their imports to keep supply flowing amid the re-imposition of economic sanctions by the United States.

The shift demonstrates that China, Iran’s biggest oil customer, wants to keep buying Iranian crude despite the sanctions, which were put back after the United States withdrew in May from a 2015 agreement to halt Iran’s nuclear program.

The United States is trying to halt Iranian oil exports to force the country to negotiate a new nuclear agreement and to curb its influence in the Middle East. China has said it is opposed to any unilateral sanctions and has defended its commercial ties with Iran.

The first round of sanctions, which included rules cutting off Iran and any businesses that trade with the country from the U.S. financial system, went into effect on Aug. 7. A ban on Iranian oil purchases will start in November. Insurers, which are mainly U.S. or European based, have already begun winding down their Iranian business to comply with the sanctions.

To safeguard their supplies, state oil trader Zhuhai Zhenrong Corp and Sinopec Group, Asia’s biggest refiner, have activated a clause in its long-term supply agreements with National Iranian Oil Corp (NIOC) that allows them to use NITC-operated tankers, according to four sources with direct knowledge of the matter.

They spoke on condition of anonymity as they were not allowed to speak publicly about commercial deals.

The price for the oil under the long-term deals has been changed to a delivered ex-ship basis from the previous free-on-board terms, meaning that Iran will cover all the costs and risks of delivering the crude as well as handling the insurance, the sources said.

“The shift started very recently, and it was almost a simultaneous call from both sides,” said one of the sources, a senior Beijing-based oil executive.

In July, all 17 tankers chartered to carry oil from Iran to China are operated by NITC, according to shipping data on Thomson Reuters Eikon. In June, eight of 19 vessels chartered were Chinese operated.

Last month, those tankers loaded about 23.8 million barrels of crude oil and condensate destined for China, or about 767,000 barrels per day (bpd). In June, the loadings were 19.8 million barrels, or 660,000 bpd.

In 2017, China imported an average of 623,000 bpd, according to customs data.

Sinopec declined to comment on the change in tankers. A spokesperson with Nam Kwong Group, the parent of Zhenrong, declined to comment.

NIOC did not respond to an email seeking comment. An NITC spokesman said it would forward a request from Reuters for a comment to the country’s Ministry of Culture and Islamic Guidance.

NOT THE FIRST TIME
Iran used a similar system between 2012 and 2016 to circumvent Western-led sanctions which were effective in curtailing exports because of a lack of insurance for the shipments.

It was not immediately clear how Iran would provide insurance for the Chinese oil purchases, worth some $1.5 billion a month. Insurance usually includes cover for the oil cargoes, third-party liability and pollution.

“This is not the first time companies exercised the option… Whenever there is a need the buyers can use that,” said another of the sources, also a senior Beijing-based oil executive.

Term buyers of Iranian submitted their plans to NIOC earlier this month of how much crude they will lift in September, said two trade sources.

It typically takes about a month for Iranian crude to reach China.

With the new shipping arrangement, Iranian oil cargoes to China are expected to stay at recent levels through October, said the four sources with knowledge of the tanker changes.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

A Loud Blast Heard in Dhahran, Saudi Arabia’s Largest Crude Oil Production Site

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Loud Blast Heard in Dhahran, Saudi Arabia’s Largest Crude Oil Production Site

Two residents from the eastern city of Dhahran, Saudi Arabia, on Sunday said they heard a loud blast, but they are yet to know the cause, according to a Reuters report.

Saudi’s Eastern province is home to the kingdom’s largest crude oil production and export facilities of Saudi Aramco.

A blast in any of the facilities in that region could hurt global oil supplies and bolster oil prices above $70 per barrel in the first half of the year.

One of the residents said the explosion took place around 8:30 pm Saudi time while the other resident claimed the time was around 8:00 pm.

However, Saudi authorities are yet to confirm or respond to the story.

 

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Crude Oil

Brent Crude Oil Approaches $70 Per Barrel on Friday

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Crude oil

Nigerian Oil Approaches $70 Per Barrel Following OPEC+ Production Cuts Extension

Brent crude oil, against which Nigerian oil is priced, rose to $69 on Friday at 3:55 pm Nigerian time.

Oil price jumped after OPEC and allies, known as OPEC plus, agreed to role-over crude oil production cuts to further reduce global oil supplies and artificially sustain oil price in a move experts said could stoke inflationary pressure.

Brent crude oil rose from $63.86 per barrel on Wednesday to $69 per barrel on Friday as energy investors became more optimistic about the oil outlook.

While certain experts are worried that U.S crude oil production will eventually hurt OPEC strategy once the economy fully opens, few experts are saying production in the world’s largest economy won’t hit pre-pandemic highs.

According to Vicki Hollub, the CEO of Occidental, U.S oil production may not return to pre-pandemic levels given a shift in corporates’ value.

“I do believe that most companies have committed to value growth, rather than production growth,” she said during a CNBC Evolve conversation with Brian Sullivan. “And so I do believe that that’s going to be part of the reason that oil production in the United States does not get back to 13 million barrels a day.”

Hollub believes corporate organisations will focus on optimizing present operations and facilities, rather than seeking growth at all costs. She, however, noted that oil prices rebounded faster than expected, largely due to China, India and United States’ growing consumption.

The recovery looks more V-shaped than we had originally thought it would be,” she said. Occidental previous projection had oil production recovering to pre-pandemic levels by the middle of 2022. The CEO Now believes demand will return by the end of this year or the first few months of 2022.

I do believe we’re headed for a much healthier supply and demand environment” she said.

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Crude Oil

Oil Jumps to $67.70 as OPEC+ Extends Production Cuts

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opec

Oil Jumps to $67.70 as OPEC+ Extends Production Cuts

Brent crude oil, against which Nigerian oil is priced, rose to $67.70 per barrel on Thursday following the decision of OPEC and allies, known as OPEC+, to extend production cuts.

OPEC and allies are presently debating whether to restore as much as 1.5 million barrels per day of crude oil in April, according to people with the knowledge of the meeting.

Experts have said OPEC+ continuous production cuts could increase global inflationary pressure with the rising price of could oil. However, Saudi Energy Minister Prince Abdulaziz bin Salman said “I don’t think it will overheat.”

Last year “we suffered alone, we as OPEC+” and now “it’s about being vigilant and being careful,” he said.

Saudi minister added that the additional 1 million barrel-a-day voluntary production cut the kingdom introduced in February was now open-ended. Meaning, OPEC+ will be withholding 7 million barrels a day or 7 percent of global demand from the market– even as fuel consumption recovers in many nations.

Experts have started predicting $75 a barrel by April.

“We expect oil prices to rise toward $70 to $75 a barrel during April,” said Ann-Louise Hittle, vice president of macro oils at consultant Wood Mackenzie Ltd. “The risk is these higher prices will dampen the tentative global recovery. But the Saudi energy minister is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production.”

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