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Iranian oil tankers enable trackers, signal export willingness

Thursday, 5 Dec 2013 | 1:17 AM ET
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Iran's oil tanker fleet started enabled vessel tracking systems in a signal to customers that it's ready to return to world markets barely 48 hours after Tehran agreed on an interim deal on November 24 to restrict its nuclear program in return for sanctions relief, Thomson Reuters data revealed.

Before the deal's announcement in Geneva, more than 50-75 percent of National Iranian Tanker Co (NITC) tankers were seen to have their transponders turned off, according to information provided by Thomson Reuters Oil Analytics.

(Read more: Iran puts out the welcome mat for Big Oil)

But just days after the deal was struck, only eight out of 39 NITC tankers - or 21 percent of the fleet - had their tracking systems disabled as of 0330 GMT on Nov. 26, implying "that NITC is gearing up to bring its oil export operations back to pre-sanction levels," Thomson Reuters Oil Analytics' Yaw Yan Chong and Luke Pachymuthu said in a commentary on Nov. 26.

Thomson Reuters Oil Analytics believe Iran is most likely signaling a willingness to export more fuel oil – a feedstock used mainly by China's small, independent 'teapot' refiners which make up more than a quarter of the country's refining capacity.

OPEC will help Iran re-enter market: Oil minister
Bijan Namdar Zangeneh, Iranian oil minister, explains that in the event of Iranian production coming back on stream, OPEC will be able to maintain capacity and oil prices levels.

Iran's fuel oil exports - which are also blended into bunkers or fuel for ocean-going vessels – have reportedly managed to slip through the sanctions net because unlike crude oil, international sanctions don't explicitly forbid their export though the embargo does include restrictions on intermediaries and third parties who may channel fuel oil from Iran on its behalf.

'Direct Negotiations'

Thomson Reuters Oil Analytics say Iran has raised offers of its fuel oil cargoes by more than five times after the interim nuclear pact was struck with Western powers, and state-run National Iranian Oil Company (NIOC) has reverted to "direct negotiations with buyers for the first time in more than two years."

However, Iran may have to mark down offers for those cargoes sharply since China is holding ample inventory while demand has been lacking.

(Read more: Saudi Arabia: Markets will handle Iran oil boost)

"The Iranians will be hard-pressed to offload any of their low-density fuel oil at the price levels on offer," Thomson Reuters Oil Analytics said. Demand has been "pervasively poor for more than half a year with little chance of picking up any time soon."

This is the latest indication that Tehran appears to be preparing the ground and the market for the future return of Iranian supply although the late-November nuclear deal doesn't guarantee the complete dismantling of crude oil sanctions and the immediate return of Iranian supply.

If and when the embargo is comprehensively lifted, Iran wants to ramp up production to pre-sanctions levels of 4 million barrels a day, Bijan Namdar Zanganeh the country's oil minister said at the Organization of the Petroleum Exporting Countries (OPEC) meeting this week, "even if the price drops to $20."

(Read more: OPEC agrees to renew oil cap for six months: Delegates)

The possible lifting of sanctions against Iran as early as next year - setting the stage for the return of the country's oil exports - may spark a "price war" within OPEC as rival producers try to compete with heavily discounted crude offered by Tehran, CNBC reported on Nov. 5.

By CNBC's Sri Jegarajah. Follow him on Twitter @cnbcsri

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