May 17, 2019
Iran’s effort to evade US sanctions by auctioning crude to private firms that will then sell the oil on the open market has so far been a dismal failure.
The regime has put nine batches of crude up for auction on the Iran Energy Exchange (IRENEX) since October. The first two drew buyers for almost half the oil put up for bid. But since then, five of the seven offerings have not sold a drop and the other two have only sold token amounts.
Each offering contains one million barrels, available for sale in lots of 35,000 barrels. The last seven auctions, offering 7 million barrels, have only sold 105,000 barrels or 1.5 percent of what was in offer.
At the first auction in October, one million barrels were offered but only 280,000 barrels were sold at $74.85 a barrel. In November, the auction managed to sell 700,000 barrels at $64.97 a barrel.
The goal is to get around US sanctions. The NIOC auctions oil to private buyers who then go out and try to find buyers for the oil. The lack of interest is being blamed by Iran on Iran’s sales conditions. But many think the potential buyers have found that they are unable to recruit buyers.
In the first two rounds, buyers had to pay 20 percent in rials and the rest in major foreign currencies. Since the third round, all could be paid in rials. Some traders have said they want letters of credit to be accepted.
The settlement period was extended from 60 days in the first two rounds to 90 days. And the pre-bid deposit was lowered from 10 percent in the first two rounds to 6 percent since then.
But it’s still up to the buyer to line up insurance and find a tanker to take the oil from Iran.
Here is the record of the auctions in barrels sold:
Oct 2018 280,000
Nov 2018 700,000
Jan 2019 zero
Feb 4 zero
Feb 18 35,000
March 4 zero
March 17 zero
April 9 zero
April 30 70,000