Iran oil customers hang tight for now

Font Size

Print

Feedback

Email

Discuss

Related Articles

Oil hovers below $79 after 3-day slideOil spikes to USD 81.26 a barrelOil eases to USD 78.65 a barrelOil tops $80, highest since Oct 14, 2008

Tokyo, Beijing, March 16: Nippon Oil Corp.’s decision to ease out some Iranian crude due to rising political risks has rattled customers of the world’s fourth-biggest oil producer, but is unlikely to be followed by a wave of defections.

Several small Japanese buyers said they were under corporate pressure to scale back imports as Iran’s rating as a stable supplier is called into question amid the ongoing dispute with the West over its nuclear aims. But refiners across the region said they were not contemplating similar action.

The move highlights the difficulties Iran may face in finding new markets as Tehran lags other producers in investing in overseas refineries, locking in future demand.

Japan’s top refiner Nippon Oil said on Wednesday it would trim Iranian crude imports by 15 % this year due to growing country risks. It said it would buy less from Japanese trading houses, not reduce its own direct contract supplies.

The 22,000 barrel-per-day cut (bpd) is just half a % of Japan’s total imports. However, the ramifications would be huge if other oil firms also turn their back to Iran, which many traders fear could cut off supplies if faced with sanctions by the U.N. Security Council over its atomic programme.

With oil supplies expected to remain tight until new oilfields come onstream over the next few years, however, few customers appear ready to risk upsetting Tehran by cutting imports now, particularly with few alternatives at hand.“Overall Asia’s choices are limited, they have to face the consequences if there is an interruption,” says Kang Wu of the East-West Center, an energy think tank in Hawaii. “Its very hard for Asia to find any other source for its oil.”

National Iranian Oil Company (NIOC) officials said no other companies had reduced volumes due to the nuclear issue.Asia takes about two-thirds of Iran’s 2.4 million-bpd of exports, the rest flowing to Europe, Africa or Latin America.

Fears of the nuclear dispute spilling into the oil trade have lifted the risk barometer to its highest since the Iranian Revolution in the late 1970s — the last time Iranian crude flowed into U.S. refineries — or the Iran-Iraq war of the 1980s.

Surprisingly, Nippon Oil said it was hoping to boost crude imports from Iraq — long considered the least secure in the region — to limit dependence on Iran.