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Iranian state-owned NIOC will switch the benchmark basis of its official prices for European crude sales, a potential signal of Tehran’s intentions to return in full force to global markets.
In its latest official price formula issuance for January, NIOC notes it will shift its benchmark from Ice Bwave to the Ice Brent settlement, effective from 1 January for customers in northwest Europe and the Mediterranean region where buying has been largely choked by US nuclear-linked commercial sanctions. In the latter region, only Syria still receives irregular shipments of Iranian crude. Iran’s main customers are Chinese refiners.
Traders said pricing against Ice Brent settlement is more convenient for European buyers, who can hedge more easily against the single marker than against Ice Bwave, which requires hedging throughout the day.
NIOC was the last Mideast Persian Gulf crude producer selling crude against the Ice Bwave marker. Saudi state-controlled Aramco made the transition to an Ice Brent basis in July 2017, while Iraqi state-owned Somo and Kuwait’s state-owned KPC market their northwest Europe and Mediterranean-bound crude at formula prices set against Dated Brent.
The timing of NIOC’s benchmark switch could be read as a preparation for Iran’s return to global markets, some traders said. The move coincides with talks in Vienna that seek to revive the Joint Comprehensive Plan of Action (JCPOA) nuclear agreement of 2015, which the US exited in 2018. These discussions fell apart during the third quarter of this year after the new Iranian government took office, but foreign minister Amir-Abdollahian last week stressed his country seeks a “serious deal” with its counterparties.
Mediterranean and European traders have questioned the likelihood of accessing Iranian crude in the short term, given the difficulties of promptly brokering banking and logistical arrangements once sanctions have lifted.
