Oil Tanker Market

Iran’s efforts to grow oil exports are likely to increase seaborne trade volumes, offsetting some pressure on the oversupplied tanker market.

– Mehdi Asali, OPEC’s Iranian Representative, said on Jan 16th that Iran is ready to boost crude oil production 500,000 barrels per day (bpd) once sanctions are lifted with a follow up increase of another 500,000 bpd in the near future. Markets anticipate a swift recovery in Iran’s crude oil production.

– Estimates show that resuming pre-sanction levels will lead to increased seaborne cargo volumes 5~30% higher than Iranian VLCC deployment. Even if production schedules are not met, abundant stockpiles are likely to be used to maintain momentum. Forecasts advise this will have a positive effect on Middle-East bound VLCC rates.

Global Oil Prices

Iran’s return has heaped further pressure on oil prices and competition among Middle-Eastern supplier

– Sinking spot prices suggest expanding oil storage demand, therefore partially countering the oversupply in tanker markets by absorbing excess VLCC fleets.

Iran’s Oil Export and Production

Projections show that Iranian oil exports will gradually recover to pre-sanction levels between 2.3 to 2.5 million bpd, rising proportionately with oil production levels.

– Pre-sanction oil production in Iran was approximately 4 million bpd and over 60% of crude oil produced were exported abroad. Current export ratio stands around 45% which is about 1.5 million barrels exported per day. Recent Iranian commitments are likely to push scales further.

– Overall export is expected to increase 0.8 ~ 1 million bpd corresponding to 23~28 VLCC vessels.

– Current Iranian oil reserves are estimated to be 60 million barrels. If production continues to grow at a steady 10%, Iran will have exhausted its stockpile by the end the year.

Outline of Iran’s Vessels

Iran possesses 37 VLCC vessels representing 5.7% of the global VLCC portion. Excluding the vessels used for long-term transport and storage leaves Iran with roughly 20 VLCC vessels ready for deployment.

– Insurance companies in Europe refused to accept Iranian registered ships due to economic sanctions since 2012. Hence, majority of VLCC vessels were utilized as storage tanks or sailed on limited courses to Asia such as China, Japan and India.

– Iranian VLCC fleets are expected to return to the already saturated tanker market as the surge in oil exports continue, adding 7% increase in estimated 2016 VLCC supply.

– Estimates suggest the influx of Iranian VLCC fleets to bring further pressure on declining shipping rates as it increases the 30-day carrier waiting cue by 10% (extending yearly average to 110 ships) in the Persian Gulf.

Author: Yoon Jae-Woong, Maritime Shipping History Research Department – Analyst
Source: KMI Shipping Market Trend Focus, No. 284