Tankers Looking for New Support
According to Gibson, “this deal comes at a time when the Iranian economy is estimated by the IMF to have contracted by 6% in the first six months of 2020, following a 7.6% contraction last year. Iranian oil exports have fallen from 2.8 mbd back in February 2018 to around 0.2 mbd currently, although some shipments have gone unreported. China currently accounts for the majority of Iranian crude exports. Ultimately, this potentially means that China will be able to purchase all of the Iranian crude output. Historically, countries such as South Korea, India, Japan, Italy, Spain and France have all imported Iranian crude. Increased pressure from sanctions have meant that there have been almost no buyers left willing to purchase Iranian crude, but should sanctions ever be eased, there may not be enough Iranian crude to export to other countries once China is first in line to buy”.
Gibson added that “whilst it is understood that this deal may take some time to come to fruition, as the Iranian parliament must ratify it first. Should the deal actually go through in its current state, there are still a number of questions that remain. Firstly, we are currently in a period of excess oil supply. Covid19 has decimated demand, but all forecasts suggest that demand will return, albeit at a lower level than previously outlined. Increased Iranian crude production is likely to displace imports from other main crude exporters to China. Another question is how will the oil be transported? International owners are unlikely to get involved due to a threat of being sanctioned by the US government, with two Cosco subsidiaries temporarily blacklisted over alleged dealings with Iran. As such, idled NITC vessels are likely candidates to service this trade, but it will take away the trading demand from international companies shipping crude to China from elsewhere”.
The shipbroker concluded that “it is difficult to see how this deal will actually make it through in its current state, but it is clear that China and Iran could eventually have a very significant partnership which will impact significantly the crude tanker sector”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide