Iran exported nearly 8.7 million barrels of fuel oil in April, or about 300,000 barrels per day (bpd), an increase of more than five-fold from a year-ago, according to traders and data from Thomson Reuters Oil Analytics.
The April shipments earned Iran around $600 million, the figures show, despite tough Western sanctions.
Iranian marketing officials and middlemen operating mainly out of the United Arab Emirates have been able to bypass the sanctions using ship-to-ship (STS) transfers and by blending fuel oil with other oil in remote ports to mask its origin.
The fuel oil exports were 5-1/2 times greater than shipments of 240,000 tons, or 1.56 million barrels, in April 2012. Revenue grew from the sales despite deals done at steep discounts to pre-sanction market levels.
Direct sales agreements between the National Iranian Oil Company (NIOC) and buyers accounted for around 6 million barrels of the April export volumes, according to at least three sources familiar with the country’s fuel oil exports.
That is a 130 percent increase from 2.6 million barrels, or 86,666 bpd, in average monthly exports by direct sales in the first quarter.
“This month NIOC has sold three cargoes directly into China. The flow is obviously killing us because this is a lucrative market which everyone is trying to grab a share of,” said a trader in North Asia familiar with Iran’s exports to the region.
NIOC’s high sulphur, straight-run 280-centistoke (cst) is popular with small and medium-sized refiners in China because of its high gasoil yield when it is cracked.
NIOC has sold cargoes of the grade into China at marginal discounts up to low single-digit premiums to Singapore fuel oil benchmarks, traders said.
Prior to sanctions 280-cst was sometimes sold at premiums of as much as $20 to the Singapore 180-cst benchmark.
“At this rate I’m going to have to go into a different business, because there is no way I can compete with their prices,” the North Asia trader said.
NIOC’s 280-cst oil is also popular among blenders because its low-density makes it an important mixing component for Western arbitrage fuel oil cargoes, which usually have high viscosity, trader said.
Most of the Iran’s direct sales exports are dispatched from the country’s largest oil export terminal at Kharg Island, according to Sources.
Indirect sales of Iranian fuel oil, or oil sold to private trading companies based outside Iran, totalled about 2.7 million barrels in April.
These exports are carried out mostly through STS operations in international waters using “runners” or smaller tankers, which are then used to redistribute the oil to buyers from the international market.
“The buyers include the world’s biggest trading companies, international oil majors, and small one-man trading outfits,” a Middle East-based operations executive said. The number of transactions between the first STS transfer and the final buyer make it hard to trace the oil, he added.
“The buyer has no issues because his documents are not going to show the oil came from Iran,” he said.