Surge in Unsold Iranian Oil Reserves
The tightening of U.S. sanctions on dozens of tankers carrying Iranian and Russian oil has led to a significant increase in unsold oil reserves. According to data from the commodity intelligence company Kepler, between 10 to 20 million barrels have been added to Iran’s reserves since the beginning of the year.
Kepler estimates that 80% of Iran’s oil reserves are stored in tankers anchored in the waters of Singapore and Malaysia. Richard Bruns, head of geopolitics at energy consultancy Aspects, highlights that Iran and Russia continue to employ smuggling tactics such as disabling tanker auto-identification systems, falsifying location data, and transferring oil cargo between ships to evade detection.
Reports suggest that the actual volume of unsold Iranian oil is likely higher than estimated, with figures surpassing 73 million barrels. Since October last year, when Iran launched a missile attack on Israel, the United States has imposed sanctions on more than 50 tankers transporting Iranian and Russian oil, disrupting the flow of Iranian exports.
Additionally, China imposed a ban in early January on sanctioned vessels entering the port of Shandong, which serves as a key destination for Iranian, Russian, and Venezuelan oil shipments. This move has further complicated Iran’s ability to offload its oil reserves.
Declining Oil Transport Options for Iran
The tanker rental company Braemar reports that 57% of the 126 large tankers engaged in smuggling Iranian oil have been sanctioned by the U.S., making it increasingly difficult for Iran to find unsanctioned vessels for transportation.
Despite these challenges, data from Tanker Trackers and Kepler indicates that Iran’s oil exports rose slightly last month, reaching approximately 1.6 million barrels per day. Another firm, Vortexa, reported that Iran exported 1.78 million barrels per day in January. However, the inability to sell these exports to Chinese buyers has resulted in a sharp increase in offshore oil reserves.
In response to these developments, newly re-elected U.S. President Donald Trump recently signed an order reviving the “maximum pressure policy,” aiming to reduce Iran’s oil exports to zero. Kepler senior expert Homayoun Falakshahi predicts that if U.S. pressure on China proves effective, Iran’s daily oil sales could decline by 500,000 barrels in the coming months. During Trump’s previous term, Iran’s oil exports plummeted to 350,000 barrels per day in 2020.
Oil trading sources have also noted that Iran has reduced its oil discount for Chinese buyers from $2.50 to just 50 cents per barrel compared to Brent crude, reflecting Tehran’s struggle to secure buyers amid growing restrictions.
Russia Faces Mounting Challenges
On January 12, the U.S. Treasury Department sanctioned 183 tankers transporting Russian oil to China and India, including eight vessels also linked to Iranian oil smuggling. The sanctions, imposed in the final days of Joe Biden’s administration, have significantly increased Russia’s unsold oil reserves.
Kepler estimates that Russia’s crude reserves reached 88 million barrels on January 27, marking a 24% rise compared to January 10. Meanwhile, the cost of renting tankers to transport Russian oil to China has tripled since the introduction of these sanctions, now reaching a record $4.5 million. The cost of insuring Russian oil shipments has also surged, further complicating exports.
As a result of these sanctions, some tankers that previously transported Iranian oil in secret have now shifted to moving Russian crude, as both nations grapple with increasing export difficulties.
