A new Reuters report this week says more than half of Iran’s tankers are now being used as floating storage for crude oil that the regime is unable to sell.
Last week, the Iran Times carried a Reuters report that said most of Iran’s tankers had turned off their transponders—gizmos that constantly broadcast a ship’s location so that satellites can track where the ship is going.
There was speculation Iran was selling a lot of oil and trying to protect the buyers by hiding where it was delivering its cargos.
But this week, Reuters quotes two Iran-based shipping sources, people familiar with operations at Iran’s main export terminal at Kharg Island, as saying 14 of the National Iranian Tanker Company’s (NITC) fleet of 25 very large crude carriers (VLCCs), each loaded with about 2 million barrels of oil, are now at anchor acting as floating storage.
A further five of Iran’s nine Suezmax tankers, with a capacity of one million barrels each, are also parked offshore with oil aboard, they said.
That means that of Iran’s 59-million-barrel fleet of VLCCs and Suezmax sized tankers, 33 million barrels of capacity are being used to store crude at sea in the Persian Gulf, or 56 percent of the fleet.
The shipping data suggests Iran’s difficulties in selling its oil are getting more acute. With more than half the NITC fleet at anchorage, Iran’s capacity to export oil is severely curtailed.
The Iranian shipping sources said that storage tanks on land at Kharg Island, with a capacity of some 23 million barrels, are now full.
Altogether, that means 56 million barrels of Iranian crude are being stored. That is equivalent to 22 days of exports at last year’s rate of 2.5 million barrels a day and 29 days of production at the March estimated rate of 1.9 million barrels a day.
One of the sources told Reuters, “The NITC fleet was deployed to Kharg Island to load cargo to prevent shore tank overflows. This has been going on since March. The tankers are fully laden.”
Reuters reported April 13 that most of the NITC tanker fleet had switched off their transponders to conceal shipping movements. “The ships’ transponders have been switched off because they don’t want to be detected,” one of the Iranian shipping sources said then.
But the transponders may not have been turned off to conceal movements. “They are lying at anchorage. They do not navigate so they don’t need the navigation system to be on,” another source says. That so many of Iran’s tankers are anchored may explain why much of the fleet felt able to switch off its transponders.
Ships are obliged by international law for safety to have a satellite tracking device on board when traveling at sea. However, a ship’s master has the discretion to turn off the device with the permission of the vessel’s flag state.
With half of its own fleet being used as floating storage, Iran cannot deliver large quantities of crude, as many had speculated. It would need to hire tankers on the open market or have importers hire their own ships to maintain exports.
But traders said it would seem unlikely Iran would deploy its own tankers for floating storage if it were able to sell the crude instead.
“We are not sure if NITC will be requiring more tankers for storage but commercial tanker arrivals coming into load crude have dropped significantly in the past one month because of sanctions issues,” said one of the Iranian shipping sources.
Independent estimates are that exports fell from 2.5 million barrels per day last year to about 1.9 million bpd in March and have fallen further in April.
If it cannot find new buyers for its crude Iran’s only option other than floating storage would be to curtail oilfield production.