In Milestone, Iran Ships First Oil To Europe Since Sanctions Lifted

In case you haven’t noticed, Iran is on a roll.

Much to the chagrin of Israel and any number of GOP lawmakers in the US, the nuclear accord is a done deal and creates a $100 billion windfall for Tehran.

And that’s just the beginning of the story.

Starting in Q1, Iran will ramp crude production by 500,000 b/d and by 1,000,000 b/d by year end. The sharp increase in production is expected to help Iran quintuple its oil revenue by the end of 2016 compared to what the country was pulling in while languishing under international sanctions.

Assuming $29/ barrel crude, Iran would bring in some $2.35 billion a month assuming production of 2.7 million b/d, which is below the 2.86 million b/d that Tehran actually pumped in January.

Of course we shouldn’t put it in dollar terms. After all, Iran prefers euros. But not for “political reasons” - it’s business not personal (see here).

 

Iran’s return to the world stage and effort to shed the pariah state label comes just as the country is poised to score a dramatic win in Syria, where the IRGC and Hezbollah are battling to preserve the Shiite crescent by restoring the Alawite government’s hold on the country. Thanks to Russian air support, that effort is now going swimmingly, and it has Riyadh, Ankara, Doha, and the entire Sunni world in a state of frightened disbelief.

Tehran is also ramping up its already impressive ballistic missile program. In October, and then again in November, Iran tested the Emad, a next generation surface-to-surface weapon with the range to hit arch rival Israel.

On Sunday, Iran marked yet another milestone. The country loaded its first cargo of oil to Europe since sanctions were lifted.

“A tanker for France’s Total SA was being loaded at Kharg Port while vessels chartered for Chinese and Spanish companies were due to arrive later Sunday,” Bloomberg reported earlier today, citing an Iranian oil ministry official. “A tanker hired by a Russian company hadn’t arrived, and was still expected, the official said.” Here’s more:

The Suezmax vessel Distya Akula, chartered by Lukoil PJSC’s trading unit Litasco, departed Iran’s loading terminal at Kharg Island in the Persian Gulf and was located Saturday in the Gulf of Oman off the east coast of the United Arab Emirates, according to ship tracking data compiled by Bloomberg. Suezmaxes can hold 1 million barrels of oil. The draft of the Distya Akula vessel in the water indicated it is full, according to the data.

 

 

Supply deals were signed with Total and Hellenic Petroleum SA of Greece.

 

Total, Spanish refiner Compania Espanola de Petroleos and Russia’s Lukoil PJSC all booked cargoes of Iranian crude to sail from Kharg Island to European ports, according to shipping reports compiled by Bloomberg earlier this month. The vessels included one very large crude carrier, a tanker capable of carrying 2 million barrels of crude, and two smaller Suezmax-sized vessels with capacity of about 1 million barrels each.

Aside from what this represents symbolically for Tehran, this means that Iranian supply is now officially set to flood an already oversupplied market. That is, after nine months of speculation, Iran is now back to market and that means still more supply at a time when the world's storage capacity is very nearly exhausted. 

But oil bulls need not despair. Because the first time a Turkish mortar kills a Hezbollah fighter in Aleppo, the world will careen into a global armed conflict and if that doesn't send oil back to $100, nothing will.