Iran Runs Into Big Problem: No Buyers For Its Oil, As Full Tankers Pile Up Off China
Iran was euphoric when as part of the Trump MOU, it got permission to flood the world with its oil after Trump effectively eliminate sanctions that had been in place for 40 years. However, it has quickly run into another, potentially far bigger problem:
as the armada of Iranian oil tankers exits the Persian Gulf, it is now struggling to find buyers before the expiry of a 60-day window granted by Washington,
According to Vortexa data and Bloomberg calculations, there are
more than 58 million barrels of Iranian crude and condensate was on-the-water as of July 1, yet more than 90% has no clear destination. The vessels are either indicating "for orders" or Singapore as their next port of call, a sign they may conduct ship-to-ship transfers in the Malacca Strait.
A failure to quickly sell the crude will
not only deprive Tehran of much-needed revenue, but more importantly, will weaken its hand in the ongoing negotiations with Washington. The Islamic Republic has until mid-August to find buyers after the US lifted sanctions on the oil in the middle of June and ended a blockade of Iranian ports, part of an interim peace deal.
And here is the culprit : demand from Chinese independent refiners - Iran's main customers prior to the conflict - has been muted as the sector's run rates crash to a nine-year low. China's state-owned refiners have also stayed on the sidelines, citing concerns over the ability of banks to finance any deals.
Translation: as we suspected a month ago, China's economy is in far worse shape than telegraphed, and as a result it does not need Iranian oil (what oil it does need it just sources from its massive strategic reserves).
In Early June we said that confirming our
recent reporting on China's oil demand collapse, crude oil imports to China in May fell to their lowest since October 2017 because of the price spike resulting from the Persian Gulf tanker traffic disruption, plunging refinery margins (due to price ceilings imposed by Beijing), of a slowing economy and the rapid slowdown in the economy.
The May total stood at 33 million barrels, or 7.8 million barrels daily, Bloomberg
reported, citing Chinese customs data. This is roughly a 30% drop vs the average daily import rate of 11.6 million barrels last year. As
previously noted, refinery run rates are down as well, as are fuel exports, with Beijing careful to make sure there is enough diesel and gasoline for the domestic market.
All this is happening as the latest batch of Chinese data was "shockingly bad", promptly fears of a China hard landing.
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