Iran has deferred at least one of its fuel oil loadings for June to Asia, according to a trade source with direct knowledge of the matter.
In a bid to recapture lost market share and bolster revenue, state-owned National Iranian Oil Co (NIOC) quickly ramped up exports of fuel oil once U.S. imposed economic sanctions were lifted in January. By March, NIOC had committed all of its short-term fuel oil capacity through cash deals or in barter agreements in return for much-needed gasoline.
But at least one of NIOC’s fuel oil cargoes to Asia has now been deferred.
“One of our June fuel oil cargoes had to be deferred for a later date,” said the Singapore-based trader who declined to be identified as he is not allowed to speak to the media.
NIOC’s offices in Singapore did not respond to requests for comment.
The delayed cargo comes at a time when NIOC is trying to establish market share in the wake of the sanctions.
Iranian 280-centistokes (cSt) straight-run fuel oil usually commands a premium over more heavily processed residual fuels since it can be used as a refining feedstock to further extract gasoline and diesel, or as a blendstock with other heavier fuel oils for use in marine fuels or power generation.
The value of Iran’s 280-cSt straight-run fuel oil has slumped to single-digit dollar premiums per tonne against the Middle East benchmark price on a cost and freight (CFR) basis to Fujairah, down from double-digit premiums around a month ago, industry sources said.
RISING EXPORTS & COMMITMENTS
Traders buying Iran’s fuel oil said that NIOC might have over-committed in sales and was now struggling to keep up, although this could not be independently verified.
Since the lifting of the sanctions, NIOC has locked in a number of term contracts with several international traders, among others, pushing total fuel oil exports to about 1.27 million tonnes per month, according to data compiled by Thomson Reuters Oil Research and Forecasts.
Between May and June, however, NIOC raised its monthly exports by an additional 280,000 tonnes when it entered the spot markets, raising total monthly exports to about 1.55 million tonnes, according to Thomson Reuters Oil Research and Forecasts.
“That’s probably when they over-stretched themselves,” said a second Singapore-based trade source that also declined to be identified.
NIOC typically produces about 1 million tonnes of low-density fuel oil per month comprising about 600,000 tonnes of its straight-run 280-cSt grade shipped from Bandar Mahshahr and 400,000 tonnes of 380-cSt from Bandar Abbas.
Since the lifting of sanctions, fuel oil exports directly from Iran to Singapore, a major trading and ship fuelling hub for Asia, have totalled 688,000 tonnes, according to official data compiled by Reuters.