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Will Oil Hit $80 This Summer?

Will Oil Hit $80 This Summer?

Oil prices have recovered significantly…

Iran Sells First 280,000 Barrels Of Crude On Exchange

A little over a quarter of a one-million-barrel offering of Iranian crude on the local energy exchange found buyers in the first day of trading, IRNA reports, as Iran seeks alternative ways of selling its crude abroad after U.S. sanctions enter into effect next Monday.

The energy exchange, last used four years ago amid UN sanctions, was revived earlier this month. The idea for the exchange is to have private local entities buy the crude and then resell it to foreign traders. Analysts accurately point out that this would still put the foreign entities on the hook for penalties from Washington as doing business with Iranian entities would constitute a breach of the sanctions. However, not all agree that this fact would make the move ineffective.

Buyers, IRNA reports, were required to pay a tenth of the deal’s value within no more than two hours of making the offer. If the deal was approved by the exchange, the 10 percent cash payment would be counted as part of the 20-percent portion that has to be paid in Iranian rials. As per the rules laid out when the exchange was brought back to life, any payment for a cargo of crude would have to comprise 80 percent foreign currency and 20 percent rials.

The exchange trade could be used by illegal traders, not just legal local companies, the Middle East managing director of consultancy FGE Energy told S&P Global Platts when the news about the exchange broke. "Since the Iranian government or NIOC cannot get directly involved in negotiations with smugglers, this will allow a private middle-man ... to go and find buyers and arrange for logistics that could possibly be invisible to the monitoring systems," Iman Nasseri said.

According to Shana data cited by S&P Global Platts, the exchange was last used in April 2014 when NIOC sold 2,920 barrels of crude. Another batch after that failed to attract any buyers. Now, IRAN reports that four buyers qualified to purchase crude cargoes on the exchange.

By Irina Slav for Oilprice.com

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