Bloomberg: Iran, holder of the world’s second largest oil reserves, may be storing as much as 38 million barrels of crude at sea as demand declines for the heavier, sour grades the Persian Gulf country sells.
By Anthony DiPaola
May 12 (Bloomberg) — Iran, holder of the world’s second largest oil reserves, may be storing as much as 38 million barrels of crude at sea as demand declines for the heavier, sour grades the Persian Gulf country sells, according to a report.
Between 30 and 38 million barrels of Iranian crude may be in floating storage, a reference to oil kept in tankers and not sold, by early May, the International Energy Agency said. Cuts in orders from refiners in India, China, Japan and South Korea and maintenance at some facilities have hurt Iran’s sales.
“Weaker demand for heavier crudes, unattractive price formulas and the threat of new sanctions have combined to reduce buying interest in the country’s heavier, sour crudes,” the IEA said in a report today. Sour grades have a high sulfur content.
The Organization of Petroleum Exporting Countries, which pumps about 40 percent of global supply, cut production targets in Dec. 2008 after crude prices slumped to less than $35 a barrel. Member states have been producing more than their limits this year after crude prices have more than doubled as the global economy began to recover from recession, boosting demand.
Iran increased crude production in April to about 3.75 million barrels a day, which may add more oil to that in storage, the IEA said. Last month’s output by OPEC’s second- largest producer exceeded the country’s target by almost half a million barrels, Bloomberg data show.
The need by Iran to store crude in tankers may persist until refinery maintenance ends or the country makes its prices more attractive to buyers, the IEA said. In early 2008, Iran took five months to sell of excess crude cargoes stored on tankers, according to the report.
–Editors: John Buckley, Raj Rajendran