Iran Oil Deadline Looms as Sanctions Curb Tanker Supply
The European Union’s ban on Iranian oil shipments that takes full effect July 1 is curbing ship charters now because of the time it takes the vessels to deploy, load and deliver cargoes, the fleet’s biggest re-insurer said.
Tanker owners are already avoiding bookings to ship Iranian crude because the 27-nation bloc’s prohibition applies to vessels carrying cargoes from that date, said Andrew Bardot, the executive officer of the London-based International Group of P&I Clubs. The group’s members, covering 95 percent of the fleet against risks such as spills and collisions, follow EU law.
United Nations inspectors and Iran reached an agreement yesterday that will allow the International Atomic Energy Agency to investigate alleged nuclear-weapons work in the Persian Gulf nation. Iran’s crude exports already slumped 23 percent this year, according to Barclays Plc. A journey to China, the biggest buyer of Iranian crude, takes about 20 days and tankers are normally hired about three weeks in advance.
“Wherever the ship is when the deadline arrives, that is the cut-off,” Bardot said by phone yesterday. “We can’t drive the political pace. That’s entirely out of our hands.”
Iran’s oil exports have declined to 1.7 million barrels a day, from 2.2 million a day last year, according to Barclays. They may fall a further 300,000 to 500,000 barrels a day from July, analysts led by Helima Croft in New York said in a May 15 report. The embargo was announced in January.
The EU is reviewing the insurance ban to ensure it doesn’t have any “undesired” impact, the U.K.’s Foreign Office said May 10. Brent oil traded in Europe advanced as much as 14 percent after the embargo was first announced. It has since more than erased the gain, falling 1.5 percent to $108.95 a barrel.
Japan’s parliament is considering state guarantees for tankers carrying Iranian crude, according to two government officials familiar with the proposed legislation. Indian ship owners also asked the state to cover shipments. The government in China has underwritten some Iranian cargoes, the Paris-based International Energy Agency said in March.
China’s imports of crude from Iran rebounded in April from the lowest level in almost two years after the nations settled a dispute over payment terms. Its purchases from the Persian Gulf nation rose 53 percent to about 390,000 barrels a day, compared with 254,000 in March, according to data today from the Beijing- based General Administration of Customs.
Arrive and Unload
To comply with the sanctions, ships carrying Iranian oil would need to unload before July 1, said Clare Hatcher, a consultant at Clyde & Co., an international trade law firm based in London.
China was the biggest buyer of Iranian crude in 2010, followed by Japan and India, according to the U.S. Energy Department. Tankers take about 20 days to reach the northeast port of Qingdao in China from Iran, and traders usually book ships three weeks before their loading date, said Per Mansson, the managing director of shipbroker Norocean Stockholm AB.
Some shipments of petrochemicals, which the EU banned from May 1, lost cover for the end of their voyages because delays or port congestion caused them to arrive after the deadline, Bardot said. The ships’ owners found alternative insurance, he said.
The government in Tehran, facing four sets of UN sanctions, says its nuclear research is for civilian purposes. Chinese, French, German, Russian, U.K. and U.S. negotiators will start a third round of discussions with their Iranian counterparts in Baghdad tomorrow. EU ministers agreed previously to review the ban on shipping insurance this month.
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