The declining oil price has increased concern among the world traders. As a result, the OPEC held a meeting and made the oil producing countries agree to production cuts. The oversupplied market was saturated and it became a major problem for Iran. As the OPEC deal was accepted, Iran got the opportunity to sell more than 13 million barrels of oil that were held on tankers at sea for a very long time.
By the start of 2016, Iran had 29.7 million barrels of oil at sea. The level remained almost unchanged until October 2016 at 29.6 million barrels. After the OPEC deal, Iran’s oil at sea had dropped to 16.4 million barrels. The tanker tracking sources initially claimed that Iran had 30 tankers full of oil out of its fleet of 60 vessels during the summer. Now, the level has dropped to 12 to 14 tankers of oil. Many companies in Asia such as India, China, South Korea and several European countries have purchased Iranian oil in recent times.
As the oil production has been cut down by almost all the oil producing countries, Iran is hoping to catch up with new European markets like Baltic and other countries in the central and eastern Europe. However, no clear information on whether oil had already been sold there is available.
Iran benefited greatly mainly because it was able to get an exemption from the OPEC deal. The oil producing countries have met in November 2016 to cut down oil production by 1.2 million barrels per day for the first six months to reduce the pressure caused by oversupply. Iran claimed that the OPEC should not try to cut down Iranian oil production, especially when the international sanctions were lifted just in January of 2016. The other oil producing countries agreed to the demands of Iran. The OPEC deal will be in effect starting from 2017, but Tehran has notoriously offered numerous discounts. This is an attempt to encourage buyers to stock up on oil now as the production will be cut down later.
Iran is trying to sell as much as oil as it can because the country doesn’t have the land storage facilities to store the oil. The fleet of tankers is heavily used to store excess oil and a large portion of the oil was condensate. SHANA, the news agency of the oil ministry of Iran reported that Kharg Island reached a record of berthing 10 tankers at the same time in the later part of December.
Iran’s new commercial policy will help the country to export a large portion of the oil stored in tankers because this type of oil storage is expensive. Buyers are also interested in stocking oil for winter as the oil prices will soar high in the near future. Insurance companies too have come forward to provide cover for Iranian vessels because ship to ship oil transfers are much easier for Iran to execute.