March 8, 2010 / 3:23 PM / 9 years ago

UPDATE 4-Trafigura, Vitol stopping Iran gasoline sales-sources

* Trafigura, Vitol halt fuel supplies as U.S. sanctions loom

* Join growing list of suppliers giving up Iran market

(Adds details on Trafigura and Vitol in 4th par)

By Simon Webb and Luke Pachymuthu

DUBAI/SINGAPORE, March 8 (Reuters) - Oil trading firms Trafigura and Vitol are stopping gasoline sales to Iran, industry sources said on Monday, joining a growing list of suppliers that have halted sales under threat of U.S. sanctions.

U.S. politicians are working on legislation to slap sanctions on suppliers of fuel to Iran to increase pressure on the Islamic Republic to halt uranium enrichment. Western powers accuse Tehran of using its atomic programme to develop weapons, while Iran says it needs nuclear electricity.

“The field of suppliers is narrowing, and Iran is getting squeezed,” a Middle East oil trader said.

The Financial Times reported on Monday that Trafigura and its rival Vitol had halted supply to Iran. Privately-owned Trafigura has its main offices in Amsterdam [ID.nLK595640]. Independent oil trader Vitol is based in Switzerland.

Vitol decided to stop participating in new tenders to supply Iran at the start of the year, the company said in a statement e-mailed to Reuters. It was completing existing spot supply deals that were made before the start of the year, it added.

Trafigura executives were unavailable for comment on whether they had made a similar decision to Vitol to honour existing supply deals.

Trafigura and Vitol will join international oil major BP (BP.L), Glencore and Reliance Industries (RELI.BO) among suppliers that have stopped selling fuel to Iran. The U.S. legislation would penalise firms that also have operations in the United States.

DELIVERIES

Shipping data obtained by Reuters showed that Vitol was unloading gasoline from the vessel NS Parade at Iran’s port of Bandar Mahshahr on Monday. The ship was carrying 34,000 tonnes, or just under 300,000 barrels, of motor fuel.

The shipment was part of “previous tenders or agreements that were concluded prior to a change of direction”, the company said. “We decided not to take part in tenders at the start of the year.”

Shipping data also showed vessels chartered by Trafigura discharging cargoes in Iran in February.

Analysts say Iran would always find traders to sell it fuel even if larger, established oil firms and trading houses stop sales. Still, the smaller list of suppliers means Tehran would have to pay higher prices for the fuel, analysts and traders say.

France’s Total (TOTF.PA), Malaysia’s state oil firm Petronas [PETR.UL] and Kuwait’s Independent Petroleum Group are among firms that continue to supply Iran, traders said.

A Total spokesman declined to comment on Monday as to whether the company may take a similar decision to Vitol and Trafigura. The volumes Total supplies were small, he added.

Iran is the world’s fifth-largest oil exporter but lacks sufficient refinery capacity to meet domestic gasoline needs, forcing it to import up to 40 percent of requirements.

The country spends billions of dollars each year covering its shortfall through purchases on the international market and then subsidising the gasoline at the pump. Its motor fuel is among the world’s cheapest.

The Islamic Republic has taken measures to restrict consumption and has rationed the fuel. The government plans to begin phasing out subsidies this year, part of a wider move to save up to $100 billion annually from subsidies on fuel, gas, power, water, food, health and education.

Iran also tested last year emergency measures to produce gasoline from petrochemical plants. Iran’s oil minister said at the time the move showed the potential limitation of any sanctions on fuel suppliers to Iran.

Analysts said the measures could only serve as a short-term solution to lack of supplies due to the high cost of production from petrochemical plants and the impurity of the fuel produced.

Iran’s purchases of gasoline from abroad for February were about 23 percent higher than the 2009 average, at more than 150,000 bpd, Reuters data showed. [ID:nLDE60U015]

“The companies don’t feel it is worth it to carry on fuel trading with anymore,” said IHS Global Insight Middle East Energy analyst Samuel Ciszuk.

“Political pressure from the United States and its European allies are starting to make an impact and deter fuel trading with Iran.” (Additional reporting by Jonathan Saul in London, Muriel Boselli in Paris and Alejandro Barbajosa in Singapore; Editing by Sue Thomas and Keiron Henderson)

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