US and European-led sanctions have reduced Iranian production and exports substantially since their introduction in 2010 and tightening in 2012. Production is around 2.6m barrels per day (bpd) against a 2005 figure of nearly 4m bpd according to New York broker Poten & Partners. Exports, which had been running at just above 1m bpd have dropped substantially in the last couple of months to about 715,000 bpd as a result of the expiry of an Indian exemption from sanctions against imports.
Although the prospects of more oil from the Gulf may seem to be positive for the tanker market, Poten cautions that the impact is “not that straightforward”.
Even if sanctions were to be lifted Iranian production would take some time to return to pre-sanction levels.
China takes the bulk of Iranian exports - some 300,000 bpd in October according to the US Energy Information Administration.
One of the greatest uncertainties would be the utilisation of the Iranian fleet of tankers. NITC has 37 VLCCs, nine suezmaxes and five aframaxes. Most of the vessels are at anchor acting as floating storage or in lay-up. The fear is what would happen to the market if these vessels were re-activated?
The full NITC VLCC fleet would add 6% to market capacity. However, Poten says only 16 VLCCs are deployed in storage so the real addition would be 2.5-3%. Also reactivating the vessels would take time and money so they would be unlikely to appear at the same time.
As of this moment oil and gas sanctions are not even on the negotiating table yet, and impacts on the shipping market may be more muted than it would initially seem says Poten.
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