The recently announced European ban on imports of Iranian crude oil due to come into force on 1st July could mean a significant shift in crude oil movements.
According to Gibson Research, exports of Iranian crude into Europe increased during 2nd & 3rd quarters of 2011, partly as a result of the loss of 1.3 mill barrels per day of Libyan crude during the civil war.
Iran currently exports around 0.7 mill barrels per day into the European refinery system, almost half of the Libyan pre-crisis total. Spain and Italy have been the biggest European importers from Iran recently. It is also notable that France has gone from zero imports in 4Q10 to average 76,000 barrels per day during the 2nd & 3rd quarters of 2011, Gibson said.
With Libyan crude exports now nearing pre-crisis levels, by the time the ban is implemented, Europe will be well placed to switch supplies away from Iran.
Europe’s economic growth (or lack of it) is also a major factor, as demand is unlikely to rise significantly during 2012.
Should Europe require to source alternative crude supply, Saudi Arabia is the obvious candidate to make up any shortfall. The Saudis could supply any lost barrels through the Sumed pipeline taking up the capacity vacated by the loss of Iranian crude.
As for the Far East, Iranian exports to this region currently represent about 60% of its crude exports. Tougher sanctions on Europe will simply mean more crude will go east, Gibson said.
India and China will cite economic reasons for their reliance on a continuous supply, due to their growing economies. As a further inducement, Iran may offer crude at discounted prices in order to ensure that exports continue to their largest customers in Asia.
After 1st July, the political focus will turn east, as the US and Europe attempt to ramp up more pressure on India, Japan and South Korea to join the ban. In the US, tougher financial sanctions are already on the agenda.
Turkey will also come under more pressure, as it is the fifth largest importer of Iranian crude at 227,000 barrels per day. Although this country is not bound by sanctions, it is questionable whether imports will remain at current levels given the country’s aspirations to join the EU.
As long as Iran has a market for its oil in the east and is able to increase export volumes, then the impact of these sanctions will remain minimal.
“However, we can be sure that the politicians both in Europe and the US will be exerting more pressure on these nations to at least reduce their oil purchases,” Gibson concluded.
Meanwhile, Maersk Tankers has announced that the company is banning the carriage of Iranian crude in its vessels, due to EU sanctions on imports.
"As of 24th Jan 2012, all new fixtures involving Iran and all carriages of products with Iranian origin have been suspended," said Henrik Ramskov, Maersk Tankers COO, talking with Reuters.
On 23rd January, the EU banned all imports of oil from Iran, while European oil companies will be forced to sever all dealings in Iran crude by July.