Slumping world oil prices could be driven even lower by tens of millions of gallons of deeply discounted product as Iran prepares for the end of economic sanctions.
“Iran’s getting ready to open the taps,” Victor Shum of IHS Inc. told Bloomberg last week, with 45 million barrels of fuel stored in tankers in the Persian Gulf. “If they want to unwind this supply in the current weak market, they’ll have to offer discounts. It’s a buyer’s market.”
“Most of the stored oil is condensate that contains a sulphur compound, which complicates sales because many refineries can’t process it,” DiPaola writes, citing Shum and Dubai-based analyst Robin Mills of Manaar Energy Consulting. “To market this large amount of oil within three months—the equivalent of about half a million barrels a day—Iran will have to resort to offering deep discounts.”
In September, Iran had the fifth-largest oil output among members of the Organization of Petroleum Exporting Countries (OPEC), producing 2.8 million barrels per day. Now, “the country is seeking to claw back the market share it lost under sanctions,” Bloomberg notes. “The condensate in tankers moored off its southern coast will add to a worldwide oil glut, putting more pressure on crude prices that have dropped more than 40% in the last year.”