Iran Energy Exchange Opens: Bidder Buys 280,000 Barrels of Oil on Day 1

EghtesadOnline: Crude oil trade commenced on the Iran Energy Exchange on Sunday afternoon as investors competed to buy one million barrels of oil offered by the National Iranian Oil Company.

News ID: ۷۴۶۱۶۸

29 October 2018

According to Securities and Exchange news agency, demand was strong for the black gold in early trading with 10 bids made within the first minutes. The highest bid was $69.82 for a barrel of oil and the lowest $61.85. Later in the day, one bidder bought eight cargos of 35,000 barrels each.

Fars News Agency, which tracked the trading, reported that three buyers were competing with one being a multinational that dropped out later.

According to FNA, at 2:50 pm local time, two bids were made, a 35,000-barrel cargo at $62.4 per barrel, the other at $61.58. In response to the bidding prices, NIOC lowered its base price of $79.15 to %74.85 at 3:00 pm, Financial Tribune reported.

After the base price was lowered, demand rose significantly and eight bids were made. The new bidding prices ranged from $61.85 to $69.82 A barrel. Later in the hour, a bidder offered $74.85 for eight cargos and his bid was accepted. As such, the first oil trading on the local energy bourse was registered, albeit seven years after it was established.

Reports suggest that with the first successful trading session completed on Sunday, NIOC intends to continue the one-million-barrel offer on the stock market on a daily basis.

IRENEX managing director, Ali Hosseini told SENA that foreigners can apply for trading codes and buy Iranian crude on the bourse. He added that more than 100 trading codes have been given to foreigners and they can use it to trade in oil.

According to managing director of Khobregan Saham Co., an active broker, several non-listed economic entities as well as commercial companies affiliated to banks were trying to obtain trading codes to buy crude oil on the stock market.

Rare Opportunity

Mohammad Kaffash Panjeshahi said offering Iran’s light crude oil on the IRENEX international ring should continue and private sector capabilities, especially of expatriate Iranians who have close ties in and outside the country can be utilized. These investors' role in crude oil export could be effective given the next round of US sanctions that will target the key oil sector, Fars News Agency reported.

Noting that while NIOC regarded IRENEX and the capital in general as a rival in the past, he said both sides now understand that the two are not rivals and that IRENEX is not a competitor for any state-owned company.

The currency payment of Sunday’s deals will be based on the Central Bank of Iran's SANA rate system.

Trading started at 2 p.m. local time and Panjeshahi said it may continue in the coming days.

Due to fluctuations in the international crude market, the base price will be adjusted according to the latest prices upon delivery of the commodity.

Regarding parties interested in buying Iranian crude considering the US sanctions and transport problems, Panjeshahi said since Kharg Island has been assigned as the delivery point, the buyer would first identify the appropriate market in neighboring countries such as Oman, Qatar, Georgia, or Turkey.

He said this is an opportunity for the public and private sector to collaborate in light of the ongoing difficult economic conditions.

“Dad this been done before Iran’s nuclear deal, probably the chance for the private sector to take part would not have emerged. Given the open platform for the private sector to participate, trading should keep on,” Panjeshahi noted.

Several attempts had been made in the past to offer crude oil on the stock market to involve the private sector and international buyers in the heavily state-controlled oil sector -- the lifeblood of Iran’s economy.

The new measure has been touted by senior officials as an effective way to frustrate US hostility to "reduce Iran's oil export to zero."

Washington has said it will impose new and more stringent oil sanctions against on Nov. 4 aimed at undermining Iran’s economy.

NIOC in its notice of crude oil offer initially said only payments in euro, yuan and dirham will be accepted. Later it eased its rules to include other major currencies.