SINGAPORE Nov 11 Iran's fuel oil exports will
plunge to as little as a third of previous levels over the next
few months as winter demand forces the country to divert the
product to its own power plants, according to a National Iranian
Oil Company (NIOC) source.
The fall means additional revenue lost to the OPEC member,
which is already down billions of petrodollars a month due to
tough Western sanctions that have halved its crude exports and
crippled its economy by choking Tehran's biggest money stream.
The sanctions have also hobbled Iran's ability to keep its
oil and gas infrastructure in good repair and start up new
projects, making it hard to meet local gas demand.
Iran and six world powers failed in marathon talks over the
weekend to clinch a deal to curb Tehran's nuclear programme,
removing any possibility of a let-up in sanctions anytime soon.
"This year, the power stations will use more fuel oil
instead (of natural gas)," said the NIOC source, who declined to
be identified as he was not authorised to talk to the media.
Iranian oil minister Bijan Zanganeh said on Oct. 1 that the
country faces serious gas shortages the next two years because
it has not been able to develop the South Pars field fast
enough, forcing it to use oil products to fire power stations.
Sanctions have made it difficult to track Iranian fuel oil
flows. The country typically exports about 600,000 tonnes of
fuel oil a month, about 130,000 barrels per day, most of which
heads to China and the rest of Asia, trade sources said.
Exports of the heavy fuel have reached as much as 1 million
tonnes in some months. But the lower volumes that started at
end-September and are expected to last until early January will
drop monthly shipments to about 200,000-300,000 tonnes, the NIOC
Iran's low density, low sulphur fuel oil is suitable both as
a feedstock for the smaller, independent refineries in China,
often called teapots, and for blending with heavier grades.
The impact of the drop in Iranian exports is already evident
in Asia, with premiums to benchmark prices skyrocketing for
similar grades from other sources such as India, Jubail,
Thailand and Malaysia, trade sources said.
Fuel oil prices in United Arab Emirates' Fujairah port,
another key hub for the product, have jumped. Delivered bunker
prices there - usually the lowest in Asia - rose above
Singapore's marine fuel oil quotes on Oct. 24 and have since
widened to about $20 a tonne, shipping reports showed.
The double-digit premium "suggests that the Iranian material
is very tight," said a Singapore-based trader.
The tightness has also drawn supplies from other sources
"We've seen a big jump in Black Sea and Mediterranean
barrels going to Fujairah, which also suggests they are tight on
low-density and low-sulphur. That is exactly what the Iranian
material provides," the Singapore-based trader added.
Seasonal refinery turnarounds in Europe, another key source
of low-density fuel oil, have added to the region's supply woes,
trade sources said.
About 7.5 million tonnes of fuel oil from the West is
expected to arrive in Asia over October-November, more than half
of which is to come from the U.S. Gulf Coast, Venezuela and
Fuel oil from the Atlantic region is usually high-density
and needs to be blended with better quality fuel oil such as
that from Iran. With Iranian supplies falling, premiums for
other low-density grades are expected to rise further, trade
"Unless the U.S. does something about the sanctions, the
market will continue to pay very high prices for these
low-density cargoes," said another Singapore-based trader.
(Editing by Manash Goswami and Tom Hogue)