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Iran Stops Exporting Oil to U.K. Companies Alongside French Before EU Ban

Iran stopped sales of crude to French and British buyers to pre-empt a European Union ban on imports of its oil and as OPEC’s second-biggest producer negotiates contracts to supply China.

Iran “will give its crude oil to new customers instead of French and U.K. companies,” the Shana oil ministry news website reported, citing Alireza Nikzad Rahbar, a ministry spokesman.

The action may “prompt further price gains for crude,” John Caiazzo, president of Acuvest Commodity Brokers Inc. in Temecula, California, wrote in a note to clients today.

France got 4 percent of its oil imports from Iran in the first half of 2011 and the U.K. 1 percent, according to the U.S. Energy Information Administration. Iran will raise crude volumes sent to China “soon,” the state Mehr news agency said Feb. 16.

The producer is suspending exports as tension rises in the Gulf over its nuclear program, sending oil prices to the highest level in nine months. The EU and U.S. have imposed additional sanctions against the country, restricting trade and financial transactions. Iran, the largest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia, is also under four rounds of United Nations sanctions.

The country threatened to halt shipments to Italy, Spain, Portugal, Greece, France and the Netherlands when it summoned their ambassadors to the Foreign Ministry on Feb. 15 to protest the EU’s punitive measures, state media reported. Iran would end sales of crude to the six countries unless they agreed to long- term contracts and payment guarantees, state-run Press TV reported that day, without citing anyone.

Oil Prices

EU nations bought a combined 18 percent of Iran’s exports of crude and condensates, or 452,000 barrels a day, in the first half of 2011, according to the EIA’s most recent data. France purchased 49,000 barrels a day and the U.K. 11,000 barrels.

The EU said today its member countries are cutting oil purchases from Iran and have sufficient reserves to deal with disruptions. Some of the 27 nations, such as the U.K., Austria, Portugal, Belgium and the Netherlands, have already stopped buying and others including Italy, Spain and Greece are reducing imports, Marlene Holzner, an energy spokeswoman for the European Commission, said in an e-mailed reply to questions.

Oil for March delivery rose as much as $2.12 to $105.36 a barrel in electronic trading on the New York Mercantile Exchange, the highest intraday price since May 5. It increased 4.6 percent last week, taking its gain this year to 6.6 percent.

BP, Total

Total SA (FP), France’s largest oil company, stopped buying oil from Iran, Chief Executive Officer Christophe De Margerie told Bloomberg Television on Jan. 27 in Davos. Nobody answered calls by Bloomberg News to the French foreign ministry yesterday.

An official for Royal Dutch Shell Plc (RDSA), the biggest European energy company, declined to comment to Bloomberg. BP Plc (BP/) doesn’t buy Iranian crude, David Nicholas, a London-based spokesman, said by telephone.

EU emergency stocks are 136 million metric tons, equivalent to 120 days of consumption, or 4.5 years of the region’s imports from Iran, Holzner said, adding that no member state has asked for a release of reserves. EU rules require countries to hold emergency fuel stocks of at least 90 days of the average daily domestic consumption in the previous calendar year.

Iran produced 3.545 million barrels of crude a day in January, data compiled by Bloomberg show. Iranian exports in 2010 averaged 2.154 million barrels a day, according to the EIA.

China Contract

China and Iran have agreed on pricing and sales methods for a supply contract, Mehr said, citing an unidentified official at the National Iranian Oil Co. An NIOC official at the company’s Singapore crude-marketing office, who asked not to be identified in line with company policy, declined to comment on the report.

Iran held talks last month with China International United Petroleum & Chemical Corp., the nation’s biggest oil trader, over the Chinese company’s 2012 supply contract, two people with knowledge of discussions said Jan. 10. The accords between the buyer, known as Unipec, and National Iranian Oil were scheduled to be agreed on last year, according to the people, who declined to be identified because the information is confidential.

China buys 22 percent of Iran’s exports, according to the EIA. It has bought an additional 200,000 barrels a day of oil from Iran in recent months, according to the IEA. The country, the second-biggest crude consumer, may continue to increase imports from the country, Didier Houssin, director of energy markets and security, said today at a conference in London.

To contact the reporter on this story: Ladane Nasseri in Tehran at lnasseri@bloomberg.net

To contact the editor responsible for this story: Bruce Stanley at bstanley5@bloomberg.net

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