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Cyril Widdershoven

Cyril Widdershoven

Dr. Cyril Widdershoven is a long-time observer of the global energy market. Presently, he holds several advisory positions with international think tanks in the Middle…

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Iran, Qatar Crude Exports To Asia Are Tanking

Oil

After years of healthy trade in crude oil and petroleum products between Iran, Qatar and Asian customers, the tide seems to be turning. 

This week, figures emerged showing a decline in oil exports from the two OPEC members to key Asian customers. Bloomberg reported that Qatar’s crude exports to Asia have declined severely, while Reuters showed the same figures for Iran. The latter’s exports to Asia declined by 16 percent year-on-year in December, settling at a level of 1.58 million bpd, while at the same time Iranian oil exports in 2017 to Asia increased by 2.5 percent reaching a level of 1.67 million bpd. The December decline in Iranian oil exports is considered to be a result of the threat by the Trump Administration of a potential renewal of U.S. sanctions over Tehran’s nuclear program.

For Iran, the future seems to look bleak, as even stalwart Asian supporters such as China are getting less interested in the Iranian oil and gas sectors. The latest data shows that China’s December oil purchases from Iran declined by 17.2 percent to around 571,275 bpd, while Indian import volumes also declined by 6.2 percent. Japan, considered to be under pressure of Washington and Saudi Arabia (combined with UAE support), also showed a 11.2 per cent decline in Iranian oil imports, settling at around 218.757 bpd.

The same negative figures are reported for Qatari oil exports. The peninsula’s oil exports to Japan and South Korea are reported to be down by more than 20 percent for 2017. Qatar’s exports to Japan decreased by almost 25 per cent, while South Korea imported 26 percent less. These figures stand in stark contrast to the fact that OPEC leader Saudi Arabia shows an 8.1 percent growth in volumes to Japan.

Analysts indicate that the Qatari demise is mainly caused by the more aggressive Saudi Asian market share approach. JOGMEC officials stated that Aramco is using OPEC’s production cuts and Saudi’s export volume cuts to the U.S. and Europe has led to more volumes hitting Asian markets. Related: Have Oil Prices Hit A Ceiling?

For Qatar, it’s a desperate situation, as its crude oil exports are a major revenue generator. Qatar exported 86 million barrels of crude to Japan (-23 percent), South Korea imported 65 million barrels in 2017. Saudi Arabia, currently the leader of the anti-Qatar front, showed an impressive growth of 8.1 percent, reaching a market share in Asia of 40.2 percent.

Iran and Qatar will have to assess their options the coming months, as pressure on Asian market share will continue. At the same time, Trump’s continuing threat on Iran will start biting hard for the Middle East country. Several Western and Asian companies have indicated they’ll reassess their ongoing operations or investment deals with Iran. News broke already that South Korea’a POSCO has ended a $1.6 billion memorandum of agreement with the Iranian steelmaker, Pars Kohan Diar Parsian Steel (PKP), to build a steel mill in the country’s Chabahar Free Trade-Industrial Zone. Saudi pressure by sovereign wealth fund Public Investment Fund (PIF) — one of the main shareholders since 2015 — has been stated as the reason.

More of these developments are expected in the coming months, with increased pressure from Washington and Riyadh on international companies investing or operating in Iran. French oil company Total (NYSE:TOT) is rumored to be feeling the heat, as well; insiders say the company is reassessing their Iranian options due to sanctions threats. Other IOCs and investors are already very cautious in their Iran approach. Qatar isn’t exempt either, as Saudi and Emirati officials will likely urge IOCs, oilfield services, and investors to reconsider their cooperation with Doha. 

By Cyril Widdershoven

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  • citymoments on June 12 2018 said:
    With all due respects to Mr Widdershoven, I am very impressed by his insightful knowledge of E&P oil industry. I must say, it is very rare indeed, these days, to read quality piece like the above by someone who knows so well about what he is talking about. I just like to add three more perspectives for his consideration: 1. The very reason why Saudi is forced to float their economic revenue source Aramco is because they desperately need capital to keep up the production level they are operating now as well as additional capital to explore and start new projects. Lower oil price for the last three years, has made all those so called financial experts feel oil just like tap water, just turn on the tap on if we need more. Producing oil is not the same as producing shoes. If we are short of shoes, it only takes a few minutes to raise the production of shoes to meet the shortage; If we are very short of crude oil, it will takes a few years to raise the capital, a few years to explore and discover new oil reserve, a few years to apply all the permits needed before seeing any new production coming online. 2. Though Middle East crude extraction cost is lower, oil sales revenues is the only primary source of income for most middle east countries, oil at $75 a barrel only makes ends meet for most of these countries. Do not forget the very reason why OPEC 18 months started to drastically cut oil production - to raise the price of oil. Therefore, most members of OPEC will be only paying lips service during the OPEC meeting, talking about lifting or adjusting production to meet the increasing demand, none of them will like to see lower oil price going forward which means they will basically do nothing. 3. Russia, is the only wild card; especially they like to get off the sanctions, so they will help increase the production when the European and USA ask for help if oil price rises sharply. Though, their spare capacity is unknown; it is hard to see they have too much spare capacity just considering their oil industry has been denied capital access for so many years because of the sanctions.

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