U.S. sanctions on Iran, Venezuela set up crunch for heavier oil
LONDON (Reuters) - Tighter U.S. sanctions on Iranian oil planned for May are adding to a wealth of factors curbing global supply of heavy-medium crude, driving up prices for scarcer barrels and setting up a stand-off between buyers and sellers.
The new curbs on Iranian exports come on top of Washington’s earlier ban on Venezuelan crude and output snags in Angola, another big producer of the dense crude grades that best yield lucrative refined products like jet fuel.
Refiners are also seeking more of the heavy sweet crude Iran and Venezuela once provided in abundance to produce low-sulfur fuel oil ahead of new shipping emissions rules due next year.
U.S. officials say overall global oil supply will remain plentiful despite its sanctions, not least from the boom in U.S. shale. But much of the profusion in supply, led by the United States, Saudi Arabia and Russia, is in lighter grades.
The price for heavier crudes like Norway’s Grane and Heidrun has been firming over the last few months, a North Sea trader said. Over April, the price of Grane rose from around dated Brent plus 10 cents to close to dated Brent plus $1.00 a barrel.
This month Iraq’s SOMO sold 2 million barrels of Basra Heavy crude to China’s Unipec at a premium of over $2 a barrel to its official selling price (OSP), the highest in months, sources said.
Price offerings for several Angolan streams, an approximate alternative to Iranian and Venezuelan crude, were at their highest ever, traders said.
State oil company Sonangol was said to have sold a cargo of one of its heaviest grades, Dalia, over the last week for $2 a barrel above dated Brent, a $7 increase from two years ago. Typically, the grade trades at a discount of $1 or more.
(Graphic: Scarcer barrels for heavier crudes - tmsnrt.rs/2W3MBsy)
While some clients are prepared to buy at elevated prices, others are holding back. “We’re resisting it as much as possible,” one potential buyer said.