Just when you think Iran’s oil industry is at its wit’s end, they come up with a new bit of shenanigans to play.
This time it’s a global game of hide-and-seek.
At least, that’s what it looks like now that the country’s oil tankers are turning off their on-board tracking systems. Naturally, doing so would make them disappear from public radar. And according to reports, more than half of the National Iranian Tanker Company’s fleet have joined the act.
It’s a game they’ve been playing for decades, and it’s working.
Just Playing Their Roles
We’ll call them the dynamic duo in OPEC, because if it’s not Iran stirring up geopolitical unrest, it’s Venezuela – the OPEC price hawks.
And lately it seems as if Chavez and friends have let Iran take the reins. The last serious shake up by Venezuela was years ago, when Chavez booted every major oil company out of the country after nationalizing the country’s oil assets.
For the last few years, the two have practically taken turns cranking up the geopolitical heat. But one thing that most people don’t realize is that unlike Iran, Venezuela needs us to stay afloat. Even today, we buy nearly a million barrels per day from them.
But it goes even deeper than that, too. The quality of Venezuela’s oil is far from the light, sweet crude coming out of Texas and North Dakota fields.
We’re talking heavy, sour crude with more similarities to the bitumen being produced from the Canadian oil sands. Our Gulf Coast refineries are set up to refine this heavy oil – which is why Chavez would be in a sore position should he lose our business.
Running Out of Options
Unfortunately for Iran, they’re quickly running out of options.
Several months back, Iran played one of the few cards left in their global game of poker… again. Remember the hoopla over closing the Strait of Hormuz that was making headlines in January?
As you know, the Strait of Hormuz is a critical choke-point for more than 15 million barrels of Middle Eastern oil. That amount makes up almost one-fifth of the world’s oil trade.
Usually, Iran would simply ignore U.S. threats and turn their eyes east towards Russia and China. We have gotten to a point where nearly all of the country’s 2.2 million bbls per day of oil exports are shipped to China, India, Japan and South Korea:
There’s no sugarcoating it for Iran – they’re in serious trouble without China buying their oil.
And no matter how much fiery rhetoric comes out of the country, the sanctions in place aren’t making things any easier for them. Chinese oil imports from Iran have already dropped 21% during January and February of this year.
Perhaps it’s time for them to deal, which may be why the latest round of negotiations started back up this week.
Of course, the amount of progress made in these talks may only depend on whether Iran’s bag of tricks is empty.
Enjoy your weekend,
Keith Kohl
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