Iran oil revenue soars as it's the only exporter out of Hormuz

Iran has likely earned hundreds of millions of dollars of extra income from oil sales since the start of the war, benefiting from a surge in the price of its crude after it became the only major exporter able to use the Strait of Hormuz.

The Islamic Republic is benefiting twofold from price moves since the start of the war. Its flagship crude grade is selling to customers, mostly in China, at the slimmest discount in more than 10 months to Brent. And the international benchmark itself has surged above US$100 a barrel since the bombing began.

Iran’s exports are estimated to have remained close to prewar levels of about 1.6 million barrels a day this month. Ships carrying Iranian crude continue to load at the Kharg Island terminal and exit the Persian Gulf through the Strait of Hormuz — with activity gaining pace recently.

That’s in stark contrast to the effective blockade imposed on shipments from other Gulf producers.

Even as the United States and Israel have battered Iran with daily airstrikes, their military efforts have been blunted by Tehran’s ability to maintain its financial lifeline. Tehran stands to gain even further after Washington, seeking to mitigate the war’s impact on oil prices, took the surprising step of temporarily suspending sanctions on a trove of Iranian oil that was already at sea in tankers.

“The Trump Administration is practically begging Iran to sell oil,” said Richard Nephew, senior research scholar at Columbia’s Center on Global Energy Policy, who has served at the U.S. Department of State as a deputy envoy for Iran and a coordinator for sanctions policy. “I would have thought that interdicting Iranian oil sales would have been a priority for the United States.”

Based on export estimates from Tankertrackers.com and prices for the country’s flagship grade Iranian Light, Tehran would have earned about US$139 million a day from sales of its main Iranian Light crude blend so far in March, up from US$115 million in February.

Iran’s oil has grown more valuable compared with international benchmark Brent, narrowing to a discount of US$2.10 a barrel at the start of this week, the smallest in almost a year. The differential was wider than US$10 before the war.

The higher selling price for each barrel is key for Iran, which has suffered major damage from U.S. and Israeli airstrikes and will have to make significant investments to rebuild and prop up its ravaged economy. The country has also expended many weapons in retaliatory strikes around the Middle East that will need to be replenished.

Kharg Island

As countries like Iraq and Kuwait have been forced to sharply cut production, and the United Arab Emirates and Saudi Arabia have scrambled to use alternative export routes, Iran has continued to load tankers and sail them out of the Persian Gulf.