Will Fear or Hope Dominate for Crude Tanker Investors?
Iran: Oil production and export
Iran’s oil production has risen for the seventh consecutive month and produced 3.35 MMbpd (million barrels per day) in December 2015 as compared to 3.31 MMbpd in the prior month.
The country exported 1.42 MMbpd of crude oil in December 2015. This was just more than half of the 2.2 million–2.3 million MMbpd it had exported in mid-2012, which was before the export bans were imposed.
Iran’s plans
Iran has always talked about rapidly increasing its crude (DBO) oil production and exports after lifting a ban on its exports. On February 12, Iran’s first vice president, Eshaq Jahangiri, announced that Iran’s oil export will increase to 2 million bpd within a few months. The exports should touch 1.5 million bpd until mid-March.
Earlier Iran’s oil minister had also announced the country will reach pre-sanction output levels within seven months. The country is targeting oil output of 5.7 MMbpd in five years’ time. If the country achieves this level, it would probably reclaim its position as the second-largest producer in OPEC (Organization of the Petroleum Exporting Countries).
Impact on crude tankers
To gain a higher market share, Iran is competing fiercely and building relationships with countries to export oil. Asian countries like India and Japan had already agreed to import oil from Iran. The country is now trying to build its strong presence in the European market.
Earlier, some insurance issues were holding back Iran oil exports to Europe. Now it seems that the issues have cooled off and in February, Iran’s oil minister mentioned the country plans to sell 300,000 barrels of crude oil a day to European customers.
As Iranian crude reaches different parts of the world, the country can increase its exports as the demand for crude tankers will increase. This should benefit companies like Teekay Tankers (TNK), Tsakos Energy Navigation (TNP), Nordic American Tankers (NAT), DHT Holdings (DHT), Frontline (FRO), and Euronav (EURN).
At the same time, the country has many VLCCs, which they earlier used for offshore storage. Already a few have left the shore and entered the global fleet. As all the vessels join, this should increase the VLCC supply. The net effect is predicted to be neutral to a slight positive for the crude tanker industry.
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