An official at the state-run National Iranian Oil Company (NIOC) has told state-run news agency, IRNA, that the company was reducing its prices for September sales to Asia to their lowest level in 14 years, compared with Saudi crude.
The discount has been offered at a time that the second batch of renewed US sanctions, targeting Iran’s oil exports, is scheduled to be implemented on November 4.
As a part of President Donald Trump’s withdrawal from the 2015 Joint Comprehensive Plan of Action (JCPOA) or Tehran nuclear deal with world powers, Washington has threatened to block Iran’s international oil sales.
Oilprice.com reported that Saudi Arabia is also cutting prices for the Asian market and Iran is trying to protect its market share by doing the same. Iran is also offering incentives to India, such as cargo insurance, as some Indian insurers are reluctant to provide coverage for cargo from Iran.
Meanwhile, several key buyers, including China and India, who account for roughly half of Iran’s crude sales, have already said they are not willing to make significant cuts to their energy purchases from Iran.
Earlier, the head of the international office of the China Petroleum and Chemical Industry Federation (CPCIF), Andrey Yu, told IRNA news agency that "China doesn’t pay attention to the US sanctions on Iran" and would continue to buy oil and gas from Tehran.
"It is a routine between Iran and China and has nothing to do with the US. Oil, gas and trade shouldn't be influenced by the US anymore," he said, as quoted by Iranian media.
The European Union has also pledged to resist US sanctions on Tehran by implementing legislation allowing European businesses not to comply with US measures against Iran, for example, by trading in non-dollar denominated currencies, so they do not risk being penalized by Washington.
Nevertheless, after the first batch of US sanctions against Iran came into effect last week, giant European companies, including France’s oil major Total and its carmaker Renault suspended plans to invest in Iran.
Moreover, analysts believe Iran could still see its oil sales drop by around 700,000 barrels per day from current level of around 2.3 million.
Based on the new decision, Iran has cut another eighty cents from the price of its light grade oil offered to be sold to the Asian buyers next September. Tehran has also decided to offer sixty cents discount for each barrel of its heavy crude oil sought by many Asian countries.
Furthermore, Iran is offering 75 cents and eighty cents discount for its Forouzan and Soroush oils, respectively. That means, Iran has cut prices for all grades of the crude it exports.
The discounts offered are quite significant in oil deals, analysts say. Bloomberg reported that, during past six months, Iran exported 1,7 million barrels of oil per day to Asia and the amount shows the significance of discounts Tehran is offering.
According to the latest OPEC figures and Bloomberg, already Iran’s oil exports have decreased in July, although Iranian figures still show the same level of exports.
Iran has denied any connection between the offered discounts and looming US sanctions.
“The new discounts are a part of the nature of the global markets being offered by all oil exporters," NIOC source told IRNA, adding, “Thus, selling oil and gas at reduced prices complies with the rules of the market.”
Nevertheless, it’s the first time that Iran is offering discounted prices to the Asian countries for single consignments of crude.