Page 45 - IRANRptDec21

Cheap oil outweighs US sanctions risk as Chinese buyers stick with Iran for supplies
Iran ‘intent on settling gas debts to Turkmenistan as soon as possible’
Analysts believe the surge proves that Iran is in fact exporting more oil on the grey market despite the still applicable US sanctions brought in by ex-US president Donald Trump that aim to drive Iranian oil export shipments to zero. Iran was OPEC's third-largest crude producer before the Trump sanctions took effect, initially with some waivers, from 2018.
Iranian Oil Ministry officials have repeatedly stated that the country is capable of quickly increasing its oil production to pre-sanctions levels, to around 3.8mn bpd, if Tehran and world powers were to reach an agreement to revive the 2015 nuclear deal. Talks aimed at making such a deal are set to recommence on November 29.
In a recent report, OPEC said that the average price of Iranian oil in September was $74.08 a barrel, up more than 5% from the previous month. The report also said that OPEC's total production in September reached 27.3mn bpd, up 1.8% from August.
Chinese buyers of Iranian crude appear to be working to the premise that obtaining oil at cheap prices outweighs any risk of getting hit by US sanctions. China's imports of oil from Iran have reportedly held above half a million barrels per day (bpd) on average for the past three months. Traders and ship-tracking firms suggested the figure to Reuters as the news agency looked at how Chinese purchases of Iranian crude have continued apace this year despite the US sanctions threat. Another consideration is that US President Joe Biden's administration has so far opted not to enforce the sanctions against Chinese individuals and companies amid the negotiations with Tehran—due to restart on November 29—that could revive the 2015 nuclear deal, or JCPOA. If the JCPOA is brought back to full effect, the US sanctions threat on Iranian oil would be dropped.
After a dip in June and July from a record high in May as buyers ran low on import permits, Chinese independent refiners embraced Iran's cheaper crude again as the government released fresh quotas, the traders and ship-tracking sources were cited as saying.
"Deep discounts of Iranian oil and the new import quotas supported demand from Chinese independent refiners," Emma Li, tanker tracker Vortexa Analytics' China market analyst, was quoted as saying, adding that strong Chinese refining margins also lent support.
Officially, according to its customs data, China has not imported any oil from Iran since the start of 2021. But it is widely known that Iranian crude, thought to account for around 6% of China's crude imports, is currently exported to China as oil from countries including Oman, the United Arab Emirates and Malaysia.
Iranian oil was last transacted at a $4-$5 per barrel discount to Brent crude on a delivered basis, about $6-$7 below Middle East benchmark Oman, traders informed Reuters.
Iranian Oil Minister Javad Oji has said Iran is determined to settle its natural gas dues to Turkmenistan as soon as possible, Iranian state energy news agency Shana has reported. Oji’s remarks were made after a meeting with a Turkmen delegation headed by Foreign Minister Rashid Muradov on October 26.
According to Oji, Iran has two long-term (25-year) deals with Turkmenistan that saw Iran importing 40mn cubic metres (mcm) of gas on a daily basis. "Unfortunately, in the previous government, Turkmenistan's gas exports to Iran were cut off due to the delay in payment of Turkmenistan's dues," he said, noting that the issue was referred to the International Court of Arbitration and the court determined the exact amount of Iran's debt to Turkmenistan.
45 IRAN Country Report December 2021 www.intellinews.com