Oil Trading Listed on Iran Energy Exchange

EghtesadOnline: Iran officially started spot oil trading on its energy exchange on Tuesday with the National Iranian Oil Company publishing a notice of offer on Monday, in which it outlined the terms and conditions of the trading mechanism.

News ID: ۷۴۶۱۱۷

17 October 2018

In its notice published on the Iran Energy Exchange (IRENEX) website, NIOC said it was offering one million barrels of light crude oil on IRENEX and that the first session of trading will start on October 28, at 02:00 pm local time.

NIOC chief Ali Kardor, told Tasnim news agency on Tuesday that the order for offering one million barrels of crude on IRENEX was issued late Monday and took effect on Tuesday.

According to NIOC, the measure is intended to help promote tenets of the ‘Resistance Economy’  proposed by the Leader Ayatollah Seyyed Ali Khamenei which called for diversity in oil sales methods and involving the private sector in crude exports, Financial Tribune reported.

An IRENEX official confirmed the news to the Financial Tribune on Tuesday, saying that investors and companies can take part in the trading process. The move comes as the US prepares to target Iran's oil  sector on November 4.

Iran exported 1.33 million barrels of crude per day to countries including India, China and Turkey in the first two weeks of October, according to Refinitiv Eikon data. That was down from 1.6 million bpd in September, the data showed.

The October exports are a sharp drop from the 2.5 million bpd exported in April before US President Donald Trump withdrew from a multi-lateral nuclear deal with Iran in May and ordered the re-imposition of economic sanctions on the country, the third-largest producer among the members of the Organization of the Petroleum Exporting Countries (OPEC).

"While at the moment, the mechanism is limited to spot trading, plans to launch oil futures are also in the pipeline," the IRENEX official said.

The first crude delivery for private buyers will take place between November 28-December 28, NIOC said.

Kardor said the current mechanism for oil trading at IRENEX will continue until Nov. 4 and then NIOC will decide whether or not the policy needs revision.

Iran has long been trying to launch a crude futures by letting players other than the oil ministry take part in the business of oil exports. First Vice President Esh'haq Jahangiri hd said in summer that the government was embarking on new efforts to bring oil trade to the stock market.

"Iran's crude oil will be offered at the bourse so that private companies can buy and export it," Jahangiri said, adding that the move was aimed at containing the mounting US animosity and its intention to block Iran's oil export – its main forex earner.

>Trade Mechanism

As per NIOC's announcement, the base price for crude sales at IRENEX would be $79.15 bpd with the lowest allowed change in bidding price being $0.01. The lowest volume of trade for price discovery to take place would be 35,000 barrels.  The minimum and maxim volume of trade would be 35,000 barrels and one million barrels respectively. There is an unlimited range for price fluctuations.

To take part in trading, investors should pay 10% of the price in advance two hours before the offering takes place to an account belonging to the hCentral Securities Depository of Iran.

The delivery place would be Kharg Island Oil Terminal in the Persian Gulf. The sale cargo can be loaded for all destinations except Israel. Base prices are determined by Brent prices and the bench exchange rate  would be the ones announced on sanarate.ir, a website that records the daily forex trade from across the country's exchange bureaux.

According to an earlier announcement by NIOC, oil trading on IRENEX will be 20% in rial and 80% in foreign currency. Settlement of the rial portion should take place in cash before the cargo is delivered and settlement of the foreign currency will be on credit and  take place by presenting a valid bank guarantee after the cargo delivery.

Iran Energy Exchange is a commodity exchange with the possibility of trading physical energy carriers (including oil, gas, electricity and etc.) and commodity based securities. In this exchange, similar to other exchanges, many buyers and suppliers are present which helps improve the achievement of equilibrium prices of energy carriers and their interaction through a competitive atmosphere.