Iran "winning" on oil sanctions - top trader

LONDON Tue Feb 21, 2012 11:25pm GMT

A driver leaves a gas station in Athens February 21, 2012. REUTERS/Yiorgos Karahalis

A driver leaves a gas station in Athens February 21, 2012.

Credit: Reuters/Yiorgos Karahalis

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LONDON (Reuters) - An increase in world oil prices has more than compensated Iran for revenues lost to lower crude exports because of sanctions imposed by the West, the head of the world's leading oil trader said Tuesday.

Ian Taylor, chief executive of privately-held Vitol, said a decline in the value of the euro versus the U.S. dollar had also lifted the cost of dollar-denominated oil sales to European Union countries.

"The Iranians now want the price as high as possible as they've got less volumes to sell. I reckon they are probably quite close to winning based on the numbers. That was what everybody in the industry always thought would be the likely result," said Taylor.

"The politicians are all avoiding the subject at the moment but as you know oil is extremely expensive, especially in euros," he said.

Brent crude traded near $121 a barrel Tuesday, up from $107 a barrel at the start of the year but below a record high in 2008 of $147.

A decline in Iranian oil sales since the European Union announced an embargo on Iranian oil imports from July 1 has been a leading factor in the price rise. The weaker euro means oil measured in euros is near record highs. Brent in euros touched a high of 91.8 euros a barrel last week compared to a record 93.46 euros in July 2008.

The U.S. and Europe imposed tough financial measures on Iran in an attempt to stop Tehran developing what they fear is a nuclear weapons capability. Western diplomats say sanctions, including the EU embargo, aim to cut Iran's oil revenues.

Iran says its nuclear program is to generate electricity and that it will find other customers for its oil. It has retaliated by ordering a halt to oil sales to British and French companies.

$150 OIL THREAT

Taylor, a former Shell executive, said that the likelihood of an Israeli airstrike on Iran had increased and was likely to push oil prices to $150 a barrel.

"I used to think this would never happen but everyone you speak to says the Israelis will have a go at striking at Iranian nuclear sites," he said.

"The day that happens, you have to believe the Iranians throw a few mines in the Strait of Hormuz and for a few hours at least, or maybe more, I cannot see a scenario where prices would not be at that sort of level ($150 a barrel)."

"A macro fund tends to trade the flat price and for those guys I suspect they will just want to buy," he said.

The Vitol executive said he saw little chance in the short-term of a retreat in oil prices from levels near eight-month highs.

Export disruptions from Syria, Yemen and Sudan had contributed to higher prices.

"My problem is I can't see what will bring it down...I just can't see enough pressure points to the downside," Taylor said.

He estimated that Iran needed to find a home for about 500,000 barrels per day displaced from European buyers.

He said he expected backwardation in the oil market, a structure indicative of tight supplies where spot prices trade at a premium to forward values, is set to endure.

"You've got some producer selling at the back and not so much consumer buying...There tends to be more traffic on the sell-side on the far out (contracts) rather than the buy side," he said.

VITOL REVENUES $297 BLN

Swiss-based Vitol reported Tuesday revenues of $297 billion in 2011, up 44 pct from $206 billion last year on volumes of oil, carbon and gas trade of 457 million tonnes, up from 399 million tonnes in 2010.

That is only $78 billion shy of annual revenue at oil giant BP, although profit margins for oil traders are typically much lower than for an integrated oil major like BP.

Like other trading houses, Vitol has been expanding in the storage business and in December started a new African downstream company, Vivo Energy, in partnership with Royal Dutch Shell and Helios Investment Partners.

Taylor said the company was interested in further expansion in Africa and said that it will also target some European refining assets, including refineries in the UK and Germany belonging to insolvent refiner Petroplus.

Petroplus, which filed for bankruptcy after battling with high debt and slender refining margins, has refineries in five different European countries: the UK, France, Belgium, Germany and Switzerland.

"When we put a bid in for Coryton which we probably will, it's likely to be very low...Ingolstadt is the other interesting one," he said. Coryton is in Britain, Ingolstadt in Germany.

"Petit Couronne, Antwerp and Cressier are not particularly good quality in terms of their yields and netbacks."

Taylor confirmed that Vitol had supplied crude to Coryton in early 2012.

He said the company was very unlikely to follow its main trading rival Glencore in going public.

"You never say never. I think it's highly, highly unlikely."

(editing by Richard Mably)

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