Oil, Condensate Offer on IRENEX Before Yearend

EghtesadOnline: The National Iranian Oil Company will launch two new offers of crude oil and natural gas condensate on the Iran Energy Exchange before the calendar year is out on March 20.

News ID: ۷۴۶۸۶۸

09 March 2019

Amirhossein Tebianian, the NIOC representative in charge of offering petroleum products on IRENEX, said new facilities will be provided to buyers in the new offers. In the previous offers, buyers had to introduce a shipping line 20 days prior to shipment, while in the new program the period is cut to 10 days, he told IRNA.

As for prices, Tebianian said prices set by NIOC are lower generally to "attract" buyers. “Finding ships to move the  small cargos is difficult for buyers, and given the difficulties with money transfers due to the US sanctions, the prices have been set comparatively lower.”

In addition, the payments can be settled both in rial and foreign currency. In the past rounds, payments had to be settled 20% in rials and the rest in foreign currencies, namely USD, euro and dirham, Financial Tribune reported.

One of the reasons why selling crude oil in the stock market has so far fallen short of expectations, Tebianian says, is that offering of oil on IRENEX is a new method of selling oil, with which many market players, both domestic and foreign, are not familiar.

Selling oil in the capital market involves several stages in with which buyers need to become familiar, he said. In the current procedures cargos are delivered in the country of origin.

This means that buyers have to find a reliable shipper. Additionally, they have to find a market for the oil and  should make the advance payment prior to purchasing. Tebianian says managing all this demands experience and coordination on the part of the buyers.

Getting Familiar

“There are few domestic customers and it takes time for foreign buyers to get familiar with oil sale mechanisms in the [Iranian] stock market.”

The NIOC representative blamed the low sales in IRENEX on US sanctions and restrictions on money transfer. “A substantial volume of offered oil was purchased during the first and second rounds because the impact of sanctions was not as intense,” he argued. He recommended buyers to adapt with trading conditions under the sanctions regime.

The initiative to offer crude oil to private buyers started last October when NIOC for the first time offered 1 million barrels of light crude oil on IRENEX. Oil was  offered in cargos of 35,000 barrels each and NIOC sold overall 8 cargos (280,000 barrels) at $74.85 per barrel. The second round was staged two weeks later when 700,000 barrels of crude was traded.

On November 4 US President Donald Trump officially announced that he was pulling out of the Iran nuclear agreement - known also as Joint Comprehensive Plan of Action (JCPOA).

The move apparently overshadowed oil sale on IRENEX after the third and fourth rounds ended without any trade despite easier purchasing conditions.

At the sixth oil offer on IRENEX, the seller set the base price at $59.63 per barrel and offered the commodity in cargos of 35,000 barrels each. Buyers were required to purchase at least one cargo.

It was not the first time that oil on IRENEX had no buyers. NIOC didn’t find buyers for its oil during third and fourth rounds too, despite easing the purchasing conditions.