Iran doubles fuel stored in tankers

London: Iran more than doubled the fuel it stores in tankers idling in the Arabian Gulf because of falling demand for its sulphur-rich crude, people familiar with the situation said.

The increase has contributed to a surge in tanker leasing rates, with prices more than tripling since April 8, based on data from the Baltic Exchange and ship-fuel prices. Iran has 10 tankers holding at least 20 million barrels of oil, equal to about five days of the country's output, said the people.

While demand for crude oil pushed the benchmark price to a record $119.93 a barrel on April 28, Iran has a glut of high-sulphur crude as refineries that process the fuel have shut down for maintenance. The discount on Iranian Heavy crude compared with Oman and Dubai petroleum has more than doubled since the start of the year, according to data.

"There's not much demand for heavier crudes such as those from Iran," said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. "It's the peak of the refinery maintenance season in Asia, and Iran also sells oil to Europe and the Mediterranean, where some refineries are having turn-arounds," or seasonal closures for repairs, he said.

Rental rates

Freight derivatives that traders use to bet on, or hedge, swings in the benchmark price for shipping oil to Asia climbed 2.5 per cent to the equivalent of about $100,500 a day for May cargoes as of 10:08 am in Oslo, according to prices from Justin King, a broker of the contracts at Imarex NOS ASA.

Iran's use of ships for storage cut the supply of available supertankers, owned by companies such as Hamilton, Bermuda-based Frontline Ltd. and Euronav NV, based in Antwerp.