Any market reaction to Iran shipping its first crude oil cargo in five years to Europe would be short-lived, said analysts.
The price of Brent, the global benchmark, built on last week’s rise yesterday, climbing by 1.32 per cent to US$33.80 per barrel at 5pm UAE time, after the Iranian oil ministry said on Sunday that tankers were being loaded at Kharg Island.
France’s Total was expected to set off with 2 million barrels, while Spain’s Compania Espanola de Petroleos (Cepsa) and the trading arm of Russia’s Lukoil, Litasco, will also carry 1 million barrels each.
“While the announcement of Iran’s oil exports to Europe … is likely to have an impact on the markets, it is unlikely to be more than a knee-jerk reaction,” said Samir Safar-Aly, an associate at the law firm Simmons & Simmons.
Iran's deputy minister of petroleum, Rokneddin Javadi, said on Sunday that it had increased crude oil production by 400,000 barrels per day, according to Iran's news agency, Irna.
Iran’s crude oil production was 2.8 million barrels per day last year, according to the US Energy Information Administration.
Mr Safar-Aly said Iran might meet its high output targets. “It will need to address the technical constraints,” he said. “It may take several years before Iran is able to gain the market share expected of a major Opec player.”
London-based Energy Aspects said that it is not clear that Iran has ramped up production by as much as it is reporting. Amrita Sen, its chief oil analyst, said: “Iranian headlines are a bit ambiguous whether the North Azadegan field is already pumping, [which is] due for a March start-up. Even if it is, it only adds 90,000 barrels a day”.
It was no surprise that Iran would target Europe, but it has competition, said Ms Sen. “Saudi Arabia has already started to focus more on Europe, selling to Poland and Sweden for the first time,” said Ms Sen, adding that this would lead to a price drop of competing Russian-grade crude known as Urals.
Data from China yesterday showed that crude oil imports fell by 20 per cent to a three-month low last month from December. And Standard Chartered lowered its 2016 Brent crude forecast by $13 per barrel to $50, while retaining its 2017 outlook at $78 per barrel.
lgraves@thenational.ae
* with Reuters
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