By Alex Lawler and Ahmad Ghaddar LONDON, Oct 29 (Reuters) – According to Saudi Energy Minister Khalid al-Falih, no one has any idea how much oil Iran will be able to export after new U.S. sanctions against the Islamic Republic kick in on Nov. 4.
But more precisely, Iran’s shipment figures – crucial to oil markets – are already a mystery.
Iran’s oil exports are becoming harder to measure as ships switch off tracking systems, oil industry sources say, adding uncertainty over how far U.S. sanctions are scaring off buyers. The prospect of more oil heading into storage could make number-crunching even tougher.
Amid pressure from U.S. President Donald Trump to cool the price of oil, the lack of export clarity adds to the challenge for other OPEC members, chiefly top crude supplier Saudi Arabia, to make up for falling Iranian shipments.
Iran is the third-largest producer in the Organization of the Petroleum Exporting Countries and estimates of its crude exports in October vary by more than 1 million barrels per day (bpd). That amount is enough to cover the oil demand of Turkey and move prices in the 100-million-bpd world market.
Before Trump’s May announcement of the sanctions, Iranian exports were above 2.5 million bpd.
Falih acknowledged the challenge in an interview with Russia’s TASS news agency published on Oct. 22. “Nobody has a clue what Iranian exports will be,” he said.
An Iranian oil official, asked how much crude Iran was exporting in October, declined to comment.
Oil prices have extended a rally on expectations the sanctions will test OPEC and other producers. Brent crude on Oct. 3 reached $86.74 a barrel, the highest since 2014, although it has since eased to $77.
While the Saudi minister may have been referring to what happens after sanctions kick in, the range of estimates of how much Iran is exporting now is already widening.
“A large set of numbers estimating Iranian October first-half exports have been thrown to the market these last few days, ranging for 1 million bpd to 2.2 million bpd, which is a massive spread,” Kpler, a data intelligence company, said.
According to Refinitiv Eikon data, Iran exported 1.55 million bpd in the first three weeks of October, higher than the 1.33 million bpd seen in the first two weeks of the month.
Kpler put Iranian exports at 1.85 million bpd in the first 24 days of October.
An industry source who also tracks the exports estimated a similar volume of 1.8 million bpd in the first half of October, including vessels not showing on satellite tracking. A second source initially agreed and later trimmed his figure to 1.65 million bpd through Oct. 22.
“It’s pretty high, I have to admit,” this source said of estimated exports in the first two weeks of the month. “It’s possible that there is a drop-off since.”
SIGNAL SWITCHED OFF
At any time, adjustments to tanker schedules and week-by-week variation complicate the task. While easier than in the past due to satellite information, the tracking of tankers is still both art and science.
Another element may be making this harder, industry sources say.
Tankers loading Iranian crude sometimes switch off their AIS signal, an automatic tracking system used on ships, only to switch it back on at a later stage of their journey, according to oil industry sources.
This could create a problem for ship-tracking services trying to pinpoint the exact date, or even the exact hour, on which a tanker loaded its crude cargo.
Neither Iran’s National Iranian Oil Co nor National Iranian Tanker Co responded to an emailed request for comment.
“Concretely, we are able to confirm loadings of vessels having shut down AIS transponders by other means such as satellite imagery or by tracking Iranian-flagged tugs, which has proven especially valuable given the lack of AIS coverage throughout much of the Gulf,” Kpler said.
Iran was believed by oil trading and shipping sources in 2012 to be hiding the destination of its oil sales by strategically switching off vessels’ tracking systems.
Attempts by Reuters to seek official Iranian comment on that development, both in 2012 and for this article, received no response.
Iran insists it will keep exporting oil and says the U.S. sanctions will ensure the market remains volatile.
“Iranian oil exports cannot be stopped,” Tasnim news agency quoted Oil Minister Bijan Zanganeh as saying on Oct. 23.
Iranian Vice President Eshaq Jahangiri said on Sunday: “Despite sanctions, Iran’s oil exports will not fall below a million barrels a day.”
OIL INTO ASIAN STORAGE?
As the number of buyers dwindles, a large volume of Iranian crude is set to arrive at China’s northeast Dalian port this month and in early November.
China intends to cut purchases in November. But Iran is undeterred, planning to send buyers such as India and China oil for storage rather than consumption, making it harder to measure how much oil is reaching the market, sources say.
Analysts, in assessing a producer’s supply of oil to the market, generally do not take into account crude moved into storage.
“We will give them oil even for our inventory there,” a source familiar with Iranian thinking said, referring to India. “The same we will do for China.”
The data seen to date suggests Iranian crude exports in October are still down from at least 2.5 million bpd in April, before Trump in May withdrew the United States from a nuclear deal with Iran and reimposed sanctions.
Exports dropped below 1.2 million bpd under previous sanctions that were lifted following that 2015 nuclear agreement.
While Washington has said it wants to cut Iran’s oil exports to zero, Iran and Saudi Arabia say that is unlikely. The Trump administration is considering waivers on sanctions for countries that are reducing their imports.
Iran says waivers will be granted allowing shipments to continue at a lower level, as it contends that Saudi Arabia and other producers cannot fully replace Iran’s crude exports.
“Waivers are expected, as Saudi Arabia and Russia cannot do it,” the source familiar with Iranian thinking said. (Additional reporting by Rania El Gamal; editing by Dmitry Zhdannikov and Dale Hudson)
(c) Copyright Thomson Reuters 2018.