United States sanctions have forced Iranian refiners to find alternative export channels for their API Group I base oil to avoid detection and shore up vital export revenues, an executive at an Iranian shipping agency told Lube Report.
Renewed fears arose of disruption to base oil supplies from the Middle East, following the United States killing on Jan. 3 of Iranian Major General Qasem Soleimani in Iraq.
Iraq has emerged as Irans main export market for base oils as the weight of United States sanctions shut down the Islamic Republics traditional trade routes. Base oils are being trucked overland to neighboring Iraq, with unconfirmed reports saying they are re-exported as Iraqi-origin base stocks.
Higher insurance premiums could put upward pressure on prices for API Group II and III base stocks from the Middle East Gulf after last weeks decision by Londons marine insurance market to widen its list of areas around the gulf that pose perceived enhanced risk for marine insurers.
Iranian companies are shipping API Group I base oils direct to customers, sidestepping ports in the United Arab Emirates as the United States tightens sanctions on the Islamic Republics exports.
Irans place in global API Group I base oil markets is proving surprisingly resilient despite last months snap-back of United States sanctions targeting the Islamic Republics oil sector. Exports continue because of Washingtons decision to grant import waivers to eight countries, allowing them time to seek alternative supply sources.
The Middle East has become a prominent producer and net exporter of API Group II and Group III base oil, using its glut of over 2 million tons of material to cater to demand in India, North America and Western Europe, an industry insider said at a conference in Moscow.
When the United States reinstates sanctions on Irans oil industry in November, close to U.S. $47 billion of exports are likely to be hit hard. Gauging the impact on future base oil shipments has been difficult because of a dearth of accurate data, but a recent conference presentation by one refiner depicts the Islamic Republics base stock business as a major source of export revenues.
Worries about the Middle East finished lubricants market have dominated recent news headlines, but according to one industry veteran, the outlook for the sector holds promise in the medium term.
Irans API Group I base oil exports face renewed pressure as the United States lobbies key allies to cease all imports of Iranian oil ahead of a Nov. 4 deadline for U.S. sanctions to be reinstated.
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