UpdateIran crude, petrochemical exports to grow after nuclear deal

25 November 2013 09:10  [Source: ICIS news]

By Pearl Bantillo

Iran president Hassan RohaniSINGAPORE (ICIS)--Iran may eventually make a strong come-back in the global energy and petrochemical markets, after reaching a milestone deal to curb its nuclear programme in exchange for relief from sanctions estimated to be worth $7bn, industry sources said on Monday.

Tighter sanctions were imposed on Iran on suspicion that the country is developing a nuclear weapon.

The historic deal struck over the weekend in Geneva will be in effect for six months, with Iran agreeing to halt uranium enrichment beyond 5% and to be more open to United Nations (UN) inspections.

The country has been enriching uranium to medium-grade purity (20%) – which is deemed easy to enrich further to weapons-grade level .

Under the terms of the deal, Iran will be able to increase its oil exports after six months.

Crude prices fell sharply on Monday on easing supply concerns. In early afternoon trade, Brent crude fell by more than $2/bbl at $108.56/bbl, while US crude was trading at around $94/bbl, down by $1.71/bbl.

Prior to the imposition of sanctions, Iran was the second largest producer in OPEC and the world’s fourth-largest oil producer with a crude output of around 3.5m bbl/day.

But its oil exports declined markedly since the tighter sanctions and the EU oil embargo in July last year.

In the first nine months of 2013, Iran’s oil shipments averaged 1.1m bbl/day, less than half daily exports recorded early last year at 2.5m bbl/day, data from the International Energy Agency (IEA) showed.

In October 2013, Iran’s oil exports stood at about 715,000 bbl/day. Most of Iran’s exports are to customers in Asia, principally China, Japan, South Korea and India.

China took in 1.1m tonnes of Iranian crude in October, representing a 45.2% decline from the same time last year, China Customs data showed.

An easing of the ban on European shipping insurance is likely to boost Iranian crude exports to regular Asian buyers, analysts said.

“The relief in EU sanctions on insurer will take Iranian crude exports at least up to the sanctioned levels," said a Dubai-based analyst at a foreign bank.

Investment bank Societe Generale, in a report, expects a “somewhat muted” reaction from the crude market as “the resolution doesn’t at this stage extend to the lifting of sanctions on oil exports”.

“We can, however, expect some price weakness as the market adjusts to the future prospect that Iranian exports will resume,” it said.

The deal between Iran and the global powers was struck months after Iran elected Hassan Rohani, the country’s former top nuclear negotiator – as its president.

At the 8th Gulf Petrochemicals and Chemicals Association (GPCA) forum in Dubai on 19-21 November, industry players were hopeful of a positive outcome from the resumption of talks between Iran and the global majors.

Lifting the sanctions on Iran would free up more petrochemical supply and has a strong likelihood of influencing price movements of these commodities in the international markets, industry sources said.

Iranian producers have been selling their petrochemical output at below market prices because of the international sanctions, according to a Dubai-based industry source.

Once the sanctions are lifted, Iranian petrochemical may decide to hike offers to improve their margins, the industry source said.

Additional reporting by James Dennis, Aamir Ashraf, Muhamad Fadhil and Fanny Zhang

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Pearl Bantillo
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