Asian buyers that are Iran’s biggest oil clients cut their purchases by 15 percent in 2013 and are not expected to ramp up shipments quickly this year, despite the easing of Western sanctions that have curbed Tehran’s exports by more than half.
China, India, Japan and South Korea together cut imports from Iran to an average of 935,862 barrels per day (bpd) in 2013, government and industry data showed. That would mean an oil revenue loss of $46 billion for Tehran across the year, based on pre-sanction crude exports of about 2.2 million bpd.
A breakthrough agreement between Tehran and six world powers in November allows the OPEC member to keep exports at the current reduced levels of about 1 million bpd, and opens a door for lifting shipments later.
Any increase from Iran would weigh on oil prices after other OPEC producers like Saudi Arabia increased exports to fill the gap created by the Western sanctions, as well as by outages in Libya and Iraq, but some doubt how soon the Middle Eastern nation could return its exports to pre-2012 levels.
“We don't see any real reason for the negotiations to result in a substantial settlement,” Fereidun Fesharaki, chairman of FACTS Global Energy, said on Wednesday in Tokyo.
“We think this could go on for several years and no substantial amount of Iranian oil will come to the market,” said Fesharaki, who estimates Iranian oil production could go up 200,000-300,000 bpd under the current agreement.
Last week the United States and the European Union began following through on promised sanctions relief for Iran covering oil exports, trade in precious metals and automotive services as part of a nuclear agreement signed in November that began taking effect on Jan. 20.
As part of that deal, Iran is due to receive on Feb. 1 its first $550 million installment of a total $4.2 billion in oil funds to be released if its sticks to the agreement to curb its nuclear program.
Toughened sanctions were placed on Iran in 2012 over its disputed nuclear program, causing its exports to more than halve to just over one million bpd and costing it billions of dollars a month in lost oil revenue. The West say Iran’s nuclear ambitions are aimed at making a weapon but Tehran says it only wants to fuel nuclear power generation.
Iran’s biggest oil customer, China, reduced imports by 2.2 percent to 428,840 bpd in 2013, the thinnest cuts among the top four buyers. Without the November deal between Tehran and Western powers, the shallow cuts made by China could have exacerbated tensions between Washington and Beijing.
The deepest reductions in Iranian oil imports were made by India, which slashed the volume of crude it shipped in by 38 percent to 195,600 bpd.
South Korea cut purchases by 14.3 percent last year to 134,008 bpd. Japan, the last of the four major Asian buyers to release data, reduced imports by 6.4 percent to 177,414 bpd, marking its lowest daily crude imports from Iran since 1981.
Some sources who track tanker movements have said Iran’s oil exports picked up modestly in January for the third consecutive month, but data available so far hasn’t shown any increase in shipments from the OPEC member arriving in Asian ports.
Until a final agreement is reached, most of the Middle Eastern nation’s Asian buyers are unlikely to make large increases in their import volumes. Only China has made any move to increase its imports since the November deal, with a state trader trying to negotiate a new light crude contract for 2014.
The opening round of talks between Iran and six world powers on a long-term deal for Tehran to curb parts of its nuclear program in exchange for a gradual end to sanctions is expected to take place next month in New York, a U.S. official said earlier this week.SHOW MORE