Wednesday, March 10, 2010

World's Biggest Oil Trader Ends Supplies to IR Iran

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AFP & Haaretz /

The largest oil trader in the world, Vitol, said Monday it had stopped dealing with Iran, following a report that traders were pulling out of the country as sanctions and US pressure took their toll. The Financial Times said Vitol and its fellow trading giants Glencore and Trafigura had stopped supplying petrol to Iran. A spokesman for Vitol told AFP: "I can confirm that our position is as covered in the Financial Times today." One unnamed executive familiar with Iran's trade told the newspaper that Vitol had "consciously decided not to participate in Iran's tenders". Another industry executive told the paper Switzerland-based Trafigura stopped selling to Iran about three months ago because "they have concluded that there's too much political and financial risk". Glencore distanced itself from Iran late last year. Although Iran is one of the world's largest oil producers, it is forced to import petrol because its refineries are dilapidated and it suffers from intense demand because of generous subsidies. A senior Iranian oil official said Sunday that increased gasoline rationing imposed late last year has failed to reduce domestic demand, an acknowledgment that reflects the OPEC nation's economic struggles as it faces possible new sanctions. Farid Ameri, the head of Iran's National Distribution Oil Products Company, said gasoline consumption had remained unchanged this year despite a 20 percent cut in fuel rations since December.

"To meet the shortage, we need to import 22 million liters per day of gasoline and nine million liters of gasoil per day," Ameri was quoted as saying on Shana, the Oil Ministry's Web site. The remarks highlight the challenges confronting President Mahmoud Ahmadinejad's hard-line government as it struggles to rein in soaring fuel costs while also grappling with the possibility of new sanctions that could further hammer the country's faltering economy. Since December, Iranian drivers have had an 80 liter allotment of gasoline per month at a subsidized price of 1,000 rials - or about 10 cents per liter. Any volume over that costs roughly four-times the subsided price. Previously, each car received 100 liters per month. Iran is home to the world's second largest proven reserves of conventional crude and produces about 4.2 million barrels of oil per day. But a lack of refining capacity means that it produces roughly 44 million liters of gasoline per day - around only two-thirds of its of daily demand. Tehran must import more than 5 million gallons to meet its daily needs. The imports, coupled with the subsidy program, are a heavy drain on the state budget, which relies on oil sales for around 80 percent of its revenues.