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Thursday, April 12, 2012

Iran selling oil at cut rates

Boo hoo. Iran is being forced to sell its oil at less than market prices and on improved credit terms. Improved for the buyers.
Tehran has been offering a handful of potential customers in Asia, including India, 180 days of free credit, according to the officials. They estimate that each month of credit amounts to a discount of roughly $1.2 to $1.5 a barrel.

But Gulf-based officials and European traders said Tehran was struggling to find new customers despite its generous credit terms. Nations in the European Union, as well as Turkey, Japan, South Korea and China, have all announced hefty cuts in their purchases of Iranian oil.


Iran’s offer of longer payment periods amounts to a discount of about 7.5 per cent per $118 barrel. Saudi Arabia and other leading Middle East oil producers extend 30 days of credit, and Tehran in the past has allowed importers such as China to pay in 60 to 90 days.

“Obviously, [the extra credit is] the easiest way for them to discount,” said a senior European-based oil trader. “However, I think very few will be tempted.”

The International Energy Agency, the western countries’ oil watchdog, estimates that Iran’s oil production has fallen to a 10-year low and could drop further as sanctions disrupt an industry already suffering from years of under-investment.
I'm glad to see that Iran is hurting for oil customers. Unfortunately, Ahmadinejad says that they can hold out until 2015. If these kinds of sanctions had been implemented three years ago, they might have helped. But now, Iran needs much less than three years to attain nuclear weapons.

What could go wrong?



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