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LONDON/SINGAPORE, June 21 (Reuters) - Iran could quickly
export millions of barrels of oil it is holding in storage if it
reaches a deal with the United States on its nuclear program
and has been moving oil into place to prepare for an eventual
restart, four traders and industrial sources said.
The U.S. and Iran began in mid-June their sixth round of
indirect talks on reviving a 2015 nuclear deal that former U.S.
President Donald Trump pulled out of in 2018. Trump reimposed
sanctions on Irans energy sector, leading refiners in many
countries to shun Iranian crude and forcing Tehran to pump well
Iran sits on the worlds fourth-largest oil reserves and
relies heavily on oil revenues. If and when the administration
of U.S. President Joe Biden and the Iranian government agree a
deal that results in the lifting of sanctions, Iran plans to
increase output to 3.8 million barrels per day (bpd) from the
current 2.1 million bpd, according to oil ministry officials.
That would return the countrys production level to where it
was before the sanctions, but would take time because of years
of low investment in mature oilfields and heavily reduced
As a stopgap measure while it works on boosting production,
the National Iranian Oil Company (NIOC) is expected to export
from onshore and offshore storage that contains as much as 200
million barrel, according to energy consultancy and monitoring
This could allow the country to export an extra 1 million
bpd, or 1% of global supply, for more than six months.
"Iran will be using its nearly 60 million barrels of crude
inventory, of which 30-35 million barrels are built during the
past two years, within a few months of sanctions removal," said
Iman Nasseri, managing director for the Middle East with FGE
An increase of 1 million bpd of Iranian crude would put
downward pressure on benchmark global oil prices, but investment
bank Goldman Sachs said last month that the global oil market
should be able to absorb the additional supply relatively
Fuel demand is rising as global economic activity recovers
from the impact of the COVID-19 pandemic, and OPEC producers
and their allies have been cautious about increasing supply to
the market in part to avoid a shock should Iranian supply
"From a macro perspective, a return of Iranian barrels to
the market should not derail OPEC+ intentions to gradually
increase production as long as demand in Europe and the United
States continues to recover," said Florian Thaler, the CEO and
co-founder of consultancy OilX.
PREPARING FOR AN EXPORT RESTART
Iran has boosted the volume of crude it has stored on oil
tankers in recent months, according to data intelligence firm
Kpler, in what may be a preparation for a restart to exports.
Some of those tankers are already in Asia, historically the
biggest market for Irans oil.
"We currently estimate around 78 million barrels of oil and
condensate are stored on water and this compares against only 41
million barrels at the same time last year," said Homayoun
Falakshahi, a senior analyst at Kpler.
"A lot of tankers are already parked close to East Asian
markets, so it could be a question of days," he added.
Tankers holding 8 million barrels of Iranian oil including
condensate were using waters outside Singapore's coast to carry
out transfers when needed, two shipping sources said.
Iran reduced exports to China in April and May and pumped
more into storage, perhaps with the aim of selling it at a
higher price when sanctions are lifted, a senior Chinese trader
Iranian oil in floating storage stood at between 50 million
and 60 million barrels according to estimates from consultancies
FGE, IHS Markit and OilX.
FGE and OilX said most of Iranian floating storage was
condensate, a preferred feedstock for petrochemical plants in
China, South Korea and the United Arab Emirates.
According to FGE, Iran has around 120 million barrels of
crude and condensate in on-land storage, almost one third of it
in overseas storage facilities, mainly in China.
Two Western trade sources said there was between 20 to 30
million barrels of storage space in that region of China
earmarked for Iranian oil.
A handful of mostly privately controlled Chinese companies
which have stepped into the market over the past two years have
been leasing up land storage in the eastern province of Shandong
- Chinas hub for independent refineries- and northeast Chinas
Liaoning province, said a Chinese trader close to some of these
firms. At least 13 million barrels of storage space are
dedicated to storing Iranian oil, the trader estimated.
PREPARING FOR RESTART
Expecting a deal in coming weeks or months, NIOC's marketing
division has been in contact with historical customers.
At least one European refiner has held in-depth discussions
with NIOC on resuming purchases and Indian refiners say they
plan to reduce spot purchases to make way for Iranian contract
Chinese and Indian firms, and European consumers such as
Saras, Eni and Repsol are expected to show interest in Iranian
barrels, according to Falakshahi.
Iranian officials are optimistic they can increase
production quickly, and one senior Iranian oil ministry official
said earlier this month that most output could be restored
within a month. Observers expect it will take a little more
"We do expect a recovery of 500,000 to 700,000 bpd within 3
months from sanctions removal, and total 1 to 1.2 million bpd of
oil production recovery within 6-12 months from
sanctions removal," said Sara Vakhshouri, president of SVB
(Reporting by Bozorgmehr Sharafedin and Jonathan Saul in London
and Chen Aizhu in Singapore, additional reporting by Florence
Tan in Singapore, editing by Louise Heavens)