Iran's Oil Shipments Pile Up at Sea as Major Buyers Hesitate

SadaNews - Large quantities of Iranian oil are accumulating at sea, amid Tehran's struggle to find buyers before the expiration of the sixty-day deadline granted by Washington. 

The quantity of Iranian crude oil and condensates located on tankers at sea exceeded 58 million barrels as of July 1, according to data from Fortecsa and Bloomberg calculations. More than 90% of these shipments remain without a specific destination. 

The tankers list either "awaiting instructions" or Singapore as the next port of call, indicating the possibility of transferring shipments from one vessel to another in the Strait of Malacca. 

Iran Fails to Dispose of Oil Shipments 

Failing to sell these shipments quickly could deprive Tehran of much-needed revenues and could weaken its negotiating position with Washington.

The Islamic Republic has until mid-August to find buyers after the United States lifted sanctions on Iranian oil in mid-June, ending the blockade on Iranian ports as part of a temporary peace agreement.

Demand from independent Chinese refineries - which were the main buyers of Iranian oil before the outbreak of conflict - has been weak, after their operating rates fell to their lowest levels in nine years.

Government-run Chinese refineries have also refrained from entering the market, citing concerns about banks' ability to finance any transactions.

Where Are the Stuck Iranian Oil Shipments Concentrated?

Most of these shipments are concentrated in the Arabian Gulf and its surroundings, or in the Indian Ocean, or in the Strait of Malacca near Singapore. Iran stated on Wednesday that it has shipped more than 40 million barrels of oil since the U.S. lifted the maritime blockade imposed on it.

However, more than 20 million barrels of Iranian crude oil have remained stuck in Asian waters for seven days or more, an increase of nearly 18% compared to the previous week, according to data from Kepler. Tehran faces several obstacles in its efforts to market these oil shipments.

The restrictions imposed by the European Union and the United Kingdom are still in place, complicating insurance procedures for shipments, while some ports may hesitate to welcome the "shadow fleet" tankers used by Tehran to transport its crude oil.

There is also a possibility that shipments could be disrupted mid-transaction if President Donald Trump decides to end the deadline early. 

Buyers' Concerns Over the Return of Sanctions on Iran 

Buyers remain fearful that Washington could reimpose sanctions if negotiations collapse, according to U.S. Treasury Secretary Scott Bicen who spoke to Fox News on Tuesday. Bicen clarified: "No party other than China has purchased this oil, which was bought even when it was subject to sanctions, so it is still being traded at a discount price." 

Another main obstacle for Iran in disposing of its crude oil is the weak demand within major Asian markets, as interest remains limited despite Tehran's attempts to attract buyers.

The region also enjoys abundant supplies, whether from non-Iranian Gulf oil that has become able to transit through the Strait of Hormuz, or from crude shipments coming from farther areas that were purchased during the war period.

China's imports of Iranian crude oil fell by more than half in June on a month-to-month basis to about 654,000 barrels per day, according to data from Kepler. However, at least one tanker discharged a shipment of Iranian oil in China last week, according to data from Kepler and Fortecsa.

The Indian Stance on Importing Iranian Oil 

Indian Oil Minister Hardeep Puri met with his Iranian counterpart in New Delhi last week, but he refrained from committing to resume imports. 

State-run refining companies in India are currently avoiding purchasing Iranian oil, having already secured their crude supplies until at least the end of August, according to people familiar with the matter who requested anonymity due to the discussions still being private.

The individuals added that these companies are still waiting for clarifications from Washington regarding the mechanism of dollar-denominated payments. They indicated that India might consider resuming Iranian oil purchases once the payment mechanisms become clear, while a full lifting of sanctions could allow refineries to resume imports from Iran in the long term.

Asian Demand for Iranian Oil 

However, there could be a rapid Asian interest in Iranian oil if prices come in at suitable levels. Refineries that have already secured their crude supplies might resell part of their shipments to make room for Iranian oil if offered at significant discounts, and they could also increase their operating rates if raw material costs decline.