EconomyIranMiddle East

Iran offers 3-year oil futures to ‘powerful’ buyers

Iran has announced that it will allow oil futures contracts for certain international buyers as it seeks to offset the impacts of US sanctions on its supply to the global markets.

Iranian Vice-President Es’haq Jahangiri said on Tuesday that contracts for buying Iran’s oil at pre-determined prices with maturity of up to three years would be available for “powerful economies”.

“Any powerful country that wishes to work with Iran can pre-order Iran’s oil for the next two to three years,” said Jahangiri in remarks covered by the Shana news agency, which is run by Iran’s Oil Ministry.

The second top government official said the measure was part of Iran’s efforts to minimize the impacts of US sanctions on the Iranian economy and its oil revenues.

Iran has seen a decline in oil income since the US restored a series of economic sanctions on the country that had been lifted as part of a nuclear agreement in 2015.

Iran has denied US claims that sanctions would be able to cut the country’s oil exports to zero, saying it will exhaust any channel to ship its oil to customers around the world.

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Offering future oil contracts is a first of its kind for Iran, a major global supplier which used to earn around $150 billion a year from oil exports before the sanctions started in November. That would create an opportunity for buyers who believe oil prices would increase as a result of protectionist policies adopted by the US government.

Jahangiri said major buyers could count on Iran’s ability to deliver oil at future dates as the country has maintained its production at three to four million barrels per day (bpd).  

A similar mechanism has been proposed to European buyers of Iran’s oil as Tehran believes it could provide a credit line for a special company launched by Britain, France and Germany to keep up trade with Iran at the time of US sanctions.

Iran is also exempt from an agreement between major global oil exporters to maintain cuts of 1.2 million bpd until March 2020.

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