Oil in Global Economy Series: Is Iran’s exports really declining amid sanctions?

Iranian local news agency, Iranian Students’ News Agency (ISNA) reported that in the first six months of the Iranian year (April to September), exports Iranian gas condensate declined 46 percent from a year ago. Bloomberg reported that Iran’s oil and product exports declined to just 1.72 million barrels per day in September. And latest Platts’ survey suggests that it is getting worse for Iran as the November sanctions loom. In the first week of October, Iran’s oil and gas exports have declined to 1.1 million barrel per day.

Since August, when the first round of U.S. sanctions went into effect, Iranian exports have been in decline. In August, U.S. re-imposed a part of the sanctions on Iran targeting the country’s access to the USD and dollar-based financial markets. The rest of the sanctions will go into effect by early November, specifically targeting Iran oil exports and its banking sectors which will make it more difficult for Iran to find customers risking the U.S. sanctions threat.

But, is it really down by that much as suggested?

That may not be the case. All the above data are based on tracked shipments and Iran has lately been using ghost ships (which switch off their tracking devices after leaving home ports) to transfer a sizable portion of its exports.

According to tanker trackers, which track oil tankers around the world and makes effort to track the ghost ships down, the actual exports remain much higher than the tracked shipments.

For example, while tracked shipments are suggesting China, and India imported 0.443 million barrels per day and 0.357 million barrels per day in September from Iran respectively, the actual number is likely to be as high as 0.623 million barrels per day, and 0.499 million barrels per day respectively. The numbers could even be higher as Tanker trackers fail to find all the ghost ships.

While Platts data suggest that export of crude oil and products were slightly less than 1.7 million barrels per day, numbers from tanker trackers suggest that it was slightly above 2 million barrels per day.

However, the financial markets are more focused on the tracked shipments data, which is keeping the crude price elevated to account the geopolitical tensions and the decline. Brent is currently trading at $84.8 per barrel, and WTI at $10.1 per barrel discount.