19-05-2018

Shipowners spooked by US sanctions could hurt flows of Iranian crude to Europe

European refiners are already experiencing difficulties in shipping Iranian crude as shipowners are starting to avoid this route for fear of falling foul of US sanctions, sources said Wednesday.

Several European-owned tanker owners are becoming reluctant to move Iranian stems for fear of secondary sanctions from the US just a week after President Donald Trump decided to withdraw from the Iran nuclear deal.

International buyers of Iranian oil have until November 4 to wind down contracts before the US reimposes sanctions on the oil, energy, shipping and insurance sectors, according to a US Treasury Department fact sheet.

But the London P&I Club, which advises shipowners on insurance, issued a circular Wednesday to its members saying that its lawyers had been notified “informally” by the US Department of Treasury “that any new Iran-related transactions (entered into after May 8), if it were a sanctionable activity under the US secondary sanctions, could result in penalties being imposed.”

This statement has begun to alarm some of the European crude buyers and shipowners.

“We will have to avoid calling at Iranian ports for now as it has been mooted that sanction may be applicable on any contracts made after May 8, so we are erring on side of caution and avoiding Iranian ports until there is more clarity on the situation,” a Greek shipowner active on the Iran-Europe route said.

Sources said due to these hindrances in sourcing tankers, European buyers were already starting to buy alternative crudes like Russia’s Urals, Saudi Arabia’s Arabian Heavy and Iraq’s Basrah Light.

“Today it looks like many June lifters (Iranian barrels loading in June) will have to be cancelled due to not being able to fix ships,” a crude oil trader active in the Mediterranean market said. “We saw the Greeks and the Turks buy Urals yesterday to cover Iranian [barrels].”

The only Iran-Europe fixture that was transacted today was the Suezmax vessel Episkopi which was fixed for May 27-28 loading dates but sources said this tanker was taken as part of a contract-of-affreightment (term contract basis) which predated May 8, according to sources.

Europe is a pivotal outlet for the OPEC member, taking around 700,000 b/d, or a third, of Iranian crude exports. The key buyers of Iranian crude in the wider European region are Turkey, France, Italy, Spain and Greece.

European refiners were gradually expected to reduce their purchases due to their economic exposure in the US, even if the EU governments continue to support the original JCPOA.

These sanctions might affect companies buying Iranian crude that involve significant dollar transactions or US banks or have a sizeable US presence.

Iran, the third-largest oil producer in OPEC after Saudi Arabia and Iraq, is producing around 3.82 million b/d of crude oil, according to S&P Global Platts estimates.

In 2011-15, when the EU and US previously levied sanctions on the transportation and purchase of Iranian crude, Iran saw its exports fall by almost 1 million b/d.

Iran has doubled its oil exports to about 2.2 million-2.4 million b/d since the nuclear deal was implemented in January 2016.

Source: Platts

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