This is supposed to be the launch of a scheme to displace Western exchanges as the main venue for oil sales.
The reformist daily Sharq reported last Thursday that the sale was for 500,000 barrels of Iran’s heavy crude at the government’s official selling price (OSP).
Iran routinely sells crude at the OSP plus a figure that varies frequently. So selling at the published OSP is viewed as a discount from normal terms.
Sharq said that unnamed critics accused the National Iranian Oil Co. (NIOC) of being generous to the buyer in order to complete the sale and end the embarrassment of five weeks with no buyers.
The NIOC seemed, strangely, to agree. Mohsen Qamsari, the head of the NIOC office of international affairs, was quoted as saying the cargo could have sold for $1.35 a barrel over OSP, but the NIOC decided to sell at OSP “to proceed with the sale on a flat basis with the approval of officials in order to promote trade there [at Kish].”
Qamsari seemed unhappy with the bourse. “The trading at the bourse today demonstrated that the supply of oil there is not advantageous. There is this outlook that if oil is put on sale at the bourse, there would be more transparency. But we don’t believe that, as our contracts are transparent enough,” he said.
Sharq said the cargo was destined for northwestern Europe. A financial website said the actual sale price was $105.49 a barrel.
Over the previous five weeks, the Islamic Republic had offered three other consignments of crude on the Kish bourse without making any sales. The Kish bourse opened in February 2008 offering consignments of oil products. It started listing crude oil for sale July13.
One problem with the Kish bourse is that the government sets the prices. In a normal commodity exchange, it is the traders who bargain and set prices. That, of course, is the whole point of a bourse.
The bourse is located on Kish because foreigners can fly to Kish without having to obtain an Iranian visa.
The Islamic Republic made clear in announcing plans for the bourse that it wishes to become a player in the commodities market. Commodities are traded on markets all over the world, although the dominant markets are in London and New York. Oil has historically been traded primarily in Rotterdam and New York—and, since 2000, it has been traded in an electronic market, IntercontinentalExchange (ICE), which is a virtual market operating around the clock over the Internet.