Bloomberg: Iranian oil is quietly flooding the global market again

(Patria) - Iran is delivering the most crude oil in nearly five years, consolidating its re-emergence on the geopolitical stage, while posing a risk to the fragile global crude oil market, writes Bloomberg.

Exports have risen to their highest level since the re-imposition of US sanctions in 2018, according to Kpler Ltd., SVB Energy International, FGE and the International Energy Agency. The vast majority flows to China, as the world's largest importer buys barrels at discounted prices. The recovery in sales is the most tangible sign to date that the country is reasserting itself, starting to mend ties with regional rivals, fostering relations with leading Asian powers, and even initiating trial diplomatic engagement with Washington.

Nevertheless, the additional supply is undermining confidence in the oil market, weakened by sluggish economic growth and cheap Russian oil, hindering the efforts of Iran's allies in the OPEC+ alliance to put a floor under crude oil prices.
"Iranian crude oil exports have destroyed it in the last month," said Homayoun Falakshahi, a senior analyst at Kpler.

"Iranian oil is extremely interesting for those willing to risk buying it."

Crude oil deliveries have doubled since last fall and reached 1.6 million barrels per day in May, even though US sanctions remain in place, the company states. Production has reached 2.9 million barrels per day, the highest since the end of 2018, estimates the Paris-based IEA. Consultants SVB Energy, Petro-Logistics SA and FGE believe production is even higher, possibly exceeding 3 million barrels per day.

The recovery in flows, which was severely reduced after former President Donald Trump abandoned the nuclear deal with Tehran in 2018, could strengthen an economy hit by rampant inflation, currency depreciation and unrest against President Ebrahim Raisi.

This coincides with other signs of Iran's revival - a preliminary agreement with regional adversary Saudi Arabia in April, efforts to rehabilitate Syrian ally Bashar al-Assad, and secret talks to de-escalate tensions with the White House.

Through negotiations between intermediaries in Oman and on the sidelines of UN meetings, Washington and Tehran are seeking an understanding for the release of American prisoners and to explore limits on Iran's nuclear research, in exchange, according to a person familiar with the Iranian position, for the freedom to deliver more crude oil. Iran's surge has undermined the efforts of the Organization of the Petroleum Exporting Countries and its leader Saudi Arabia to stabilize the market, which announced a new production cut of 1 million barrels per day this month, but without effect.

Since US sanctions were reimposed five years ago, Iranian oil has been delivered to its few remaining customers by a so-called "dark fleet of tankers" that disable transponders to avoid detection.

While tanker tracking shows that China has remained Tehran's main buyer, official data does not register any imports from Iran in the past year. Instead, purchases have increased from Malaysia, where Iranian cargo is often sent for ship-to-ship transfer, obscuring the origin of the shipment.

In addition to increased appetite from China, some analysts speculate that this increase has been tacitly allowed by the US government, which intends to keep gasoline prices under control. And turning a blind eye could help as the two countries work to build a diplomatic channel, writes Bloomberg.