Iran Signs Oil Deal With European Refiner as Sanctions End

Iran signed an agreement to supply crude oil with Hellenic Petroleum SA, a Greek oil refinery, in what may be the Persian Gulf producer’s first such deal with a European company since the removal of international sanctions this month.

Deliveries will begin immediately, Hellenic Petroleum said in an e-mailed statement on Friday. The agreement also includes an adjustment for a financial backlog owed to Iran’s state oil company after sanctions imposed four years ago, according to the statement. Iran’s Deputy Oil Minister Amir Hossein Zamaninia discussed potential energy co-operation with Greek Energy Minister Panos Skourletis earlier on Friday in Athens.

The oil market is bracing itself for a ramp up in supplies from Iran amid a global supply glut that pushed prices down to a 12-year low. Oil analysts surveyed by Bloomberg anticipate the nation will ship 100,000 barrels a day more crude within a month of sanctions ending, and four times that within half a year. Iran says it will boost exports by 500,000 barrels a day right away.

“Representatives from other European countries have been making trips to Tehran, so further announcements with the traditional importers of Iranian crude are likely,” said Olivier Jakob, managing director at consultants Petromatrix GmbH in Zug, Switzerland. The accord was probably the first publicly announced since sanctions were lifted, he said.

Europe had been Iran’s second-biggest oil customer before sanctions were introduced, purchasing nearly 600,000 barrels a day from the Middle East nation in 2011, according to the U.S. Energy Information Administration. Greece was one of the biggest European importers, buying about 120,000 barrels a day in 2011, data from the International Energy Agency shows.

The return of Iranian oil could send prices even lower, as it fills in the gap left by the decline in U.S. shale production, the IEA warned on Jan. 19. Flows of Iranian crude to Europe may displace similar grades sold by Russia and Iraq, which may in turn be diverted to the U.S., Citigroup Inc. predicts.

European oil companies such as Royal Dutch Shell Plc, Eni SpA and Total SA have said they’re interested in returning to Iran to develop its oil reserves, which are the fourth-biggest in the world.