So far, the government has put eight cargoes of crude on sale over the last 10 weeks, but found a buyer only for a solitary cargo.
The Kish Island bourse is an effort by the Islamic Republic to make Iran a major player in the international financial markets. It is supposed to be the launch of a scheme to displace Western exchanges as the main venue for oil sales.
The Tabnak news website said the government put its eighth consignment of 500,000 barrels of crude on the bourse last Wednesday with a list price of $113.92 a barrel. Tabnak said the consignment drew no bidders.
Back in mid-August, the Islamic Republic sold its first—and, thus far, only—shipload of crude oil at the oil bourse. It was the fourth consignment put up for sale.
The reformist daily Sharq said that successful 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 when he spoke last month. “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.
A financial website said the actual sale price was $105.49 a barrel, which was very close to the market price for an OPEC barrel that day.
It appears that the offering price of $113.92 last week was just too high to attract any buyers. It was $5 higher than the OPEC average that day.
The Kish bourse opened in February 2008 offering consignments of oil products. It started listing crude oil for sale July13.
Interested buyers can bid any price at Kish, but if the price is lower than the state’s offering price, the oil company doesn’t have to sell—and, so far, it has not.
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.