The return of Iranian oil prepares the battle for the South Korean market
(Bloomberg) – The likely return of Iranian oil sets in motion what promises to be an aggressive battle to supply a coveted corner of the Asian market.
Iran is a major producer of condensate – ultralight oil that is a byproduct of natural gas fields – and South Korea is Asia’s largest operator of separators designed to turn it into petrochemicals used to manufacture plastics.
SK Innovation Co., Hanwha Total Petrochemical Co., and Hyundai Oilbank Co. used to favor Iranian condensate from South Pars due to plentiful supply and relatively low prices, but US sanctions have seen those flows dry up. from 2019. South Korean refiners then turned to condensate from Qatar and Australia, as well as West Texas Light crude and full range naphtha from Europe and Africa.
As the Iranian nuclear deal can be relaunched by August, the Persian Gulf country will be keen to win back its former clients. And while the battle for market share will center on Korean buyers of condensate, it will spill over into the Asian light crude and naphtha markets as well.
“The fight in the condensate market will be fierce,” said Armaan Ashraf, analyst at industry consultant FGE in Singapore. “Iran will have to offer discounts to South Pars to entice buyers,” which will move a substantial amount of arbitrage condensate and naphtha across Asia and lead to lower prices relative to benchmarks, he said. -he declares.
The potential lifting of sanctions on Iranian oil will hit condensate markets much harder than crude due to the relative importance of the Persian Gulf nation’s supplies. More than 100 million barrels of South Pars are held on land in Iran or abroad in floating and bonded storage, FGE estimates.
South Pars’ exports during the destocking phase, which could last over a year, could account for more than a third of the East Suez market for commercialized condensate, the industry consultant said. Once this phase is completed, Iran will likely ship around 300,000 barrels per day from South Pars, he said.
See also: Iran appeals to former oil clients as it considers ending US sanctions
Negotiations on the nuclear deal still face obstacles, with talks in Vienna having been postponed until next week. Washington and Tehran will have to make “difficult decisions” that could upset national political constituencies, Enrique Mora, deputy foreign policy chief of the European Union, said on Wednesday.
Besides South Korea, the United Arab Emirates, China, and Japan were among the main buyers of South Pars before the sanctions. Quality was once sold for around $ 2 a barrel or more below Qatari deodorized field condensate, traders say, making it one of the cheapest raw materials.
The world’s largest condensate separation capacity is found in South Korea, the Middle East, and the United States, meaning those buyers suspended purchases from Iran while sanctions were in place. China – which has continued to buy limited amounts of Iranian crude despite sanctions – is not a major market for condensate.
(Add latest developments on Iran talks in 8th paragraph)
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