You can read my newest article today at PBS’ Tehran Bureau. The “2012 Iranian Oil Survey” breaks down crude exports by customer and country. I focus on corporate statements from refiners, new data provided by industry sources, and government promises, all of which point in one direction: Iran’s oil prospects for 2012 are dim even though exports to China and India will proceed. The European boycott and promised cuts from customers in and beyond Asia suggest Iran’s exports could be curbed by one-third or maybe even one-half. Meanwhile, there’s no guarantee that high prices will cushion the blow of sanctions. New data suggests the world oil market turned a corner earlier this year when global inventories began climbing steadily, suggesting the market is well-supplied and can probably absorb the loss of some–but not all–Iranian crude. This is bad news for the regime in Tehran, which took in $100 billion in oil revenues last year.
Here’s my explanation of why now is the best time to review of Iran’s most vital industry:
Now may be the perfect time to survey Iranian oil prospects for 2012. Contracts with Iran’s biggest customers were settled just recently. We now know how much oil Iran can expect to sell to India and China, its biggest customers. Two months before the July 1 deadline, Europe shows no signs of wavering; the threat of total boycott looms. In anticipation of U.S. sanctions, some of Iran’s most dependable customers are preparing to cut imports. Finalized contracts, public statements from once loyal customers, and new data suggest Iranian exports are shrinking ahead of summer. Exports will be cut dramatically after July unless there is a diplomatic breakthrough.
Iran’s customers now fall into three broad categories: those that will totally boycott Iran, like the E.U.; those that will continue to buy Iranian crude but will assume greater risk, like China and India; and those preparing to cut imports significantly in order to avoid sanctions, including Turkey, South Korea, and Japan. Up to one-half of Iran’s total crude exports could be affected.
I also want to add one point that somehow escaped the final version: Malaysia’s national oil company, Petronas, announced in March that Iranian oil liftings would be suspended as of April. Petronas is active in Malaysia and South Africa. It is now making up for 50,000-60,000 b/d in lost Iranian crude with increased purchases from Saudi Arabia and the West African spot market. You can add those lost barrels to the ones documented in the survey.
Also, you’ve probably noticed I haven’t posted much lately. I’ve been writing for other publications, including Tehran Bureau. You should see more content on Al Ajnabee soon, however. We’re expecting some guest articles too.