The slowly lifting Western sanctions against Iran could lead to a significant improvement in the bunker fuel on offer in the Middle East. Iran last week suspended part of its nuclear development work, with the United States and Europe responding by lifting some of the sanctions that have constrained Iran’s economy in recent years. Although much caution remains about the resumption of trade links and the US has again warned that it plans to continue to enforce the existing measures, the lifting of sanctions is will allow Iran to resume export of oil and gas.
Iran is now able to take exports to around 1.2 million bpd for January and add a boost of just under $150 million a month to government revenues. With the easing of sanctions it will be mainly Asian countries accessing Iranian oil and the initial response on the markets was limited as re-developing the infrastructure to export and bunker Iran’s oil will take time to filter through to the market and suppliers. Some reports state that insurance for the tankers involved is itself a challenge.
Speaking to UAE newspaper, The National, Gunnar Kjeldsen, the regional manager of DNV Petroleum Services, a petroleum consultancy based in Fujairah “Iran produces good fuel because they have simple refineries. The residual fuel quality in this region should improve if the sanctions are lifted and bunker fuel is again sourced from Iran.”
However, again in The National, Greg Seremetis, a fuel oil trader based in Dubai, said Iran’s oil industry posed potential threats; “If the Iranian tankers come to the market, it will open a lot of business, but it will also devastate the tanker market dramatically due to the increase in supply.”
In addition to this Iran is also looking at other ways to boost exports and gain desperately needed revenues. Reuters reported in January 2014 that Iran and Russia were negotiating an oil-for-goods swap worth $1.5 billion a month that would see up to 500,000 bpd of Iranian oil sent to Russia in exchange for equipment and goods.