Condensate Buyers May Shift Focus to Qatar From Iran

Qatar's ultra-light crude oil grades bore the full brunt of the recent return of Iranian condensate supply, with spot differentials for deodorized field condensate hitting multi-year lows, but uncertainty over the renewal of Iranian sanctions waivers could prop up the Qatari grade in the near term.

In the run up to the re-imposition of US sanctions on Iran on November 5, 2018, major ultra-light crude consumers in Northeast Asia had significantly cut their Iranian South Pars condensate imports during H2 last year, with South Korea receiving zero cargoes from the Persian Gulf producer over September-December, Platts reported.

The sharp reduction in Iranian oil flows to Northeast Asia, especially in Q4 last year, had supported price differentials for Qatari ultra-light grades.

The tide has quickly turned in recent weeks though, as South Korean and Japanese refiners resumed receiving Iranian oil, seeking to import as many Iranian cargoes as possible within the allowed range before the expiry of the sanctions waivers granted to them.

Price differentials for Qatari condensate grades took a sharp downturn as a result of the resumption of Iran-Asia trade flows, coupled with weak light distillate refining margins in Asia.

However, market sources indicated that Asian buyers may return focus to Qatari supply or even Australian grades in the near term amid growing doubts over whether Washington would extend the 180-day sanctions waiver granted to eight countries, including China, South Korea, Japan and India.

The waivers, which came into force November 5 last year, are due to end on May 5. When Asian refiners and petrochemical companies struggle to access Iranian South Pars condensate, the end-users typically rely heavily on Qatar as it's the only supplier capable of exporting 300,000 b/d or more of ultra-light crude, industry sources said.

"Even if the waivers were to be extended, Iranian cargo flows would slow down in Q2 as Asian governments would need to show that they are making significant efforts to limit or cut down on Iranian oil imports," said an official at Korea Petroleum Association in Seoul.

source: Financial Tribune