May 2 (Bloomberg) -- Iran, OPEC's second-largest oil producer, more than doubled the amount stored in tankers idling in the Persian Gulf, sending ship prices higher as demand for some of its crude fell, people familiar with the situation said.
The 10 tankers hold at least 20 million barrels of oil, equal to about 5 days of the country's output, said the people, who asked not to be identified because the information isn't public. Rates for tankers have more than tripled since April 8, based on data from the Baltic Exchange and ship-fuel prices.
While oil rose to a record $119.93 a barrel on April 28, Iran has a glut of its sulfur-rich crude as refineries that can process the fuel 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 compiled by Bloomberg.
``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 turnarounds,'' or seasonal shutdowns for repairs, he said.
Freight derivatives that traders use to bet on, or hedge, swings in the benchmark price for shipping oil to Asia climbed 2.5 percent to the equivalent of about $100,500 a day for May cargoes as of 10:08 a.m. in Oslo, according to Justin King, a broker of the contracts at Imarex NOS ASA.
Available Supertankers
Iran's use of ships for storage cut the supply of available supertankers, owned by companies including Hamilton, Bermuda- based Frontline Ltd. and Euronav NV, based in Antwerp, Belgium. The number of double-hull very large crude carriers, or VLCCs, available to rent within the next 30 days dropped to 28 from 56 a month ago, according to Paris-based broker Barry Rogliano Salles.
Frontline, the world's biggest operator of VLCCs, climbed 13.5 kroner, or 4.8 percent, to 297 kroner in Oslo. The shares earlier rose to a record 298 kroner. Euronav, Belgium's largest tanker owner, advanced 34 cents, or 1.3 percent, to 26.74 euros.
The benchmark tanker rental rate for voyages to Asia from the Middle East is $148,000 a day, compared with $44,300 on April 8, according to prices from the London-based Baltic Exchange and a formula from Oslo-based RS Platou Shipbrokers A/S.
Iran previously stored its Soroush and Nowruz heavy crudes in state-owned tankers because the sulfur content made the fuel too difficult for refiners to process. Previous buyers of the oil include SK Corp., South Korea's biggest refiner, and Reliance Industries Ltd., India's biggest company by market value.
Processing Capacity
Limited domestic processing capacity in Iran requires the country to import about 40 percent of its gasoline because national refineries can't make enough. Lighter crude with less sulfur is costlier as it yields more profitable products such as gasoline.
Iran typically keeps two or three supertankers on standby to deliver crude, Per Mansson, a tanker broker at Nor Ocean Stockholm AB, said by phone. ``There's a lack of on-land storage and this enables quick supply'' to buyers in Europe and Asia, he said.
Soroush and Nowruz crudes contain about 3.5 percent sulfur. Syria's Souedieh, at 3.9 percent, is the only grade in the Middle East with more, according to data from New York-based Energy Intelligence Group.
Crude oil for June delivery rose $3.03, or 2.7 percent, to $115.55 a barrel as of 11:36 a.m. on the New York Mercantile Exchange.
Heavy Crude
The discount for Iranian Heavy crude relative to lighter Omani and Dubai oil is at $3.25 a barrel, compared with $1.49 in December, data on Bloomberg show. Saudi Arabia is the largest producer in the Organization of Petroleum Exporting Countries.
The VLCCs, each designed to ship about 2 million barrels of crude, have been idling at either Kharg Island in the Persian Gulf or the nearby Soroush terminal for at least a week, according to AISLive data compiled by Bloomberg.
State-owned National Iranian National Iranian Tanker Co. is also hiring vessels in the single-voyage, or spot, market for contracted shipments for the national oil company, the people said. Normally, the shipping line would use its own vessels, they said.
The following is a list of VLCCs whose last reported location was Kharg Island or the Soroush terminal and when they were due to arrive. It normally takes 24 hours to 48 hours to load a cargo of crude and set sail.
Ship Name Expected arrival Last reported in Iran destinationNoor Dec. 15, 2007 Kharg IslandNajm Feb. 20 Kharg IslandHengam March 11 Kharg IslandNesa March 28 Kharg IslandNoah April 2 Kharg IslandHuwayzeh April 3 Kharg IslandDamavand April 11 Kharg IslandHoda April 14 Kharg IslandDaylam April 23 Kharg IslandNabi April 24 Soroush Terminal
