Iran Officials Seek to Dispel Rumours of Crude Floating Storage

The 30 million barrels stored at sea is mostly condensate and fuel oil, according to officials.

According to Iranian officials, the country's approximate 50 million barrels stored at sea is mostly condensate and fuel oil, and not crude as some traders fear, Reuters reports. 

The statement was said to have come from an official who declined to be identified, with a separate official also reportedly confirming that no crude is being stored. 

The news could suggest that Iranian refineries have been running crude to make clean products, but had no outlet for byproduct black oil, one Ship & Bunker reader observed.

However, industry speculation has reportedly remained wary, with some traders suggesting that Iran is avoiding disclosing its crude in storage to avoid sparking another plunge in prices. 

"If it's a known fact that they have so much crude floating, the market will react by demanding discounts to help clear it," said an unnamed source.

It was also suggested that Iran gained little from storing fuel oil. 

"It would be surprising if they stored fuel oil as they had a mechanism of pushing it into the market, so why store it if you need the cash?" said another source.

Oil prices began falling again last week after a deal was reached by world powers to lift sanctions on Iran, preparing the way for an estimated 40 to 50 million barrels of Iranian crude and condensate to flood the market. 

So far, Morgan Stanley analysts have echoed the position of Iranian officials.

"Iran oil storage concerns are likely overblown," the analysts said. 

"Industry sources suggest that a large portion of the Iranian crude stored on floating tankers is condensate."

Earlier this year, Iran reported that its fuel oil revenues rose 30 percent in the 10 months to January 21, 2015 despite sanctions.