Iran General NewsIran doubles oil in Persian Gulf tankers amid vessel...

Iran doubles oil in Persian Gulf tankers amid vessel shortage

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ImageBloomberg: Iran, OPEC's second-largest oil producer, more than doubled the amount stored in tankers idling in the Persian Gulf, sending ship prices higher as demand for some of its crude fell, people familiar with the situation said.

By Alaric Nightingale

ImageMay 2 (Bloomberg) — Iran, OPEC's second-largest oil producer, more than doubled the amount stored in tankers idling in the Persian Gulf, sending ship prices higher as demand for some of its crude fell, people familiar with the situation said.

The 10 tankers hold at least 20 million barrels of oil, equal to about 5 days of the country's output, said the people, who asked not to be identified because the information isn't public. Rates for tankers have more than tripled since April 8, based on data from the Baltic Exchange and ship-fuel prices.

While oil rose to a record $119.93 a barrel on April 28, Iran has a glut of its sulfur-rich crude as refineries that can process the fuel shut down for maintenance. The discount on Iranian Heavy crude compared with Oman and Dubai petroleum has more than doubled since the start of the year, according to data compiled by Bloomberg.

"There's not much demand for heavier crudes such as those from Iran," said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. "It's the peak of the refinery maintenance season in Asia, and Iran also sells oil to Europe and the Mediterranean, where some refineries are having turnarounds," or seasonal shutdowns for repairs, he said.

Iran's use of ships for storage cut the supply of available supertankers, owned by companies including Hamilton, Bermuda- based Frontline Ltd. and Euronav NV, based in Antwerp, Belgium. The number of double-hull very large crude carriers, or VLCCs, available to rent within the next 30 days dropped to 21 from 59 a month ago, according to Paris-based broker Barry Rogliano Salles.

Rental Rates

The benchmark tanker rental rate for voyages to Asia from the Middle East is $148,000 a day, compared with $44,300 on April 8, according to prices from the London-based Baltic Exchange and a formula from Oslo-based RS Platou Shipbrokers A/S.

Iran has previously stored its Soroush and Nowruz crudes in state-owned tankers because the sulfur content made the fuel too difficult for many refiners to process. Previous buyers of the oil include SK Corp., South Korea's biggest refiner, and Reliance Industries Ltd., India's biggest company by market value.

Limited domestic processing capacity in Iran requires the country to import about 40 percent of its gasoline because national refineries can't make enough. Lighter crude with less sulfur is costlier as it yields more profitable products such as gasoline.

Iran typically keeps two or three supertankers on standby to deliver crude, Per Mansson, a tanker broker at Nor Ocean Stockholm AB, said by phone. "There's a lack of on-land storage and this enables quick supply" to buyers in Europe and Asia, he said.

Omani Oil

Soroush and Nowruz crudes contain about 3.5 percent sulfur. Syria's Souedieh, at 3.9 percent, is the only grade in the Middle East with more, according to data from New York-based Energy Intelligence Group.

The discount for Iranian Heavy crude relative to lighter Omani and Dubai oil is at $3.25 a barrel, compared with $1.49 in December, data on Bloomberg show. Saudi Arabia is the largest producer in the Organization of Petroleum Exporting Countries.

The VLCCs, each designed to ship about 2 million barrels of crude, have been idling at either Kharg Island in the Persian Gulf or the nearby Soroush terminal for at least a week, according to AISLive data compiled by Bloomberg.

State-owned National Iranian National Iranian Tanker Co. is also hiring vessels in the single-voyage, or spot, market for contracted shipments for the national oil company, the people said. Normally, the shipping line would use its own vessels, they said.

The following is a list of VLCCs whose last reported location was Kharg Island or the Soroush terminal and when they were due to arrive. It normally takes 24 hours to 48 hours to load a cargo of crude and set sail.

 

Ship Name      Expected arrival         Last reported
               in Iran                  destination
Noor           Dec. 15, 2007            Kharg Island
Najm           Feb. 20                  Kharg Island
Hengam         March 11                 Kharg Island
Nesa           March 28                 Kharg Island
Noah           April 2                  Kharg Island
Huwayzeh       April 3                  Kharg Island
Damavand       April 11                 Kharg Island
Hoda           April 14                 Kharg Island
Daylam         April 23                 Kharg Island
Nabi           April 24                 Soroush Terminal

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