Commodity Traders Barter with Post-Sanction Iran

Global oil traders have entered into rare barter deals with the National Iranian Oil Company (NIOC), supplying Iran with much-needed gasoline in exchange for high-quality fuel oil, after most economic sanctions against Tehran were lifted in January.

Commodity traders Swiss-based Vitol and Glencore (GLCNF) , for example, have won the right to lift a combined total of at least 200,000 tonnes per month of Iranian fuel oil from March through May, according to four trading sources with knowledge of the deals.

"The big traders resumed moving gasoline to Iran shortly after sanctions were removed. Instead of a cash settlement, Iran pays back in fuel oil," said one senior Iranian trading official, who declined to be named as the deals were private.

The barter deals, which Iranian industry sources said also included some done by Russian companies, have helped to wipe out the short-term fuel oil available for export, said the official.

"There is no extra fuel oil available in the short term, because they are all committed," the official said.

Another Iranian industry official estimated Iran usually exports 700,000-800,000 tonnes of fuel oil a month during the spring months starting from late March, when warmer weather begins to curtail the fuel oil used for generating power during winter months.

Although there have been instances of Iranian fuel oil being shipped directly to Singapore, most cargoes are likely to be channelled into Fujairah, a storage and bunkering hub in neighbouring United Arab Emirates, according to two Singapore-based traders.

Once in Fujairah, the fuel oil will be fed into the local bunker market or blended with other grades to be redistributed to markets across Africa or Asia, the traders said.

Glencore was heard offering Iranian 280-centistoke (cst) fuel oil to China for April arrivals, two China-based traders said.

Vitol and Glencore both have operations at Fujairah, allowing them to use less expensive smaller vessels to deliver gasoline to Iran or to load fuel oil from there, according to the Iranian oil officials.

Vitol and Glencore declined to comment on their operations or on any deals with NIOC. NIOC officials did not immediately respond to a request for comment.

Iran has long had a gasoline shortage due to an underinvested refining industry. Its demand for the motor fuel typically rises ahead of the Iranian New Year, Nowruz, when road travel increases over two weeks from late March.

Iran, OPEC's No.3 producer, is keen to ramp up its oil exports after most western sanctions were lifted in January, aiming to resume sales to once key clients in Europe.

Reporting by Chen Aizhu in BEIJING and Roslan Khasawneh