Through negotiations between intermediaries in Oman and on the sidelines of United Nations meetings, Washington and Tehran are inching toward an understanding to free American prisoners and explore limits on Iranian nuclear research, in exchange — according to a person familiar with the Iranian position — for leeway to ship more crude.

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A State Department official said rumours of a nuclear deal are “false and misleading” and the US priority remains to stop Iran from obtaining a nuclear weapon. Iran says its atomic program is for peaceful purposes only.

Yet additional shipments — adding to flows from two other OPEC+ members under sanctions, Russia and Venezuela — are already happening, hitting global oil markets. Prices have retreated 12 per cent this year to near $US75 a barrel in London, spurring a flurry of downgrades by forecasters like Goldman Sachs Group Inc. and JPMorgan Chase & Co.

Iran’s surge has undermined efforts to stabilise the market by the Organisation of Petroleum Exporting Countries and its leader, Saudi Arabia, which this month announced a new production cutback of 1 million barrels a day, to little effect.

Ever since US sanctions were reimposed five years ago, Iranian crude has been shipped to its few remaining buyers on a so-called “dark fleet” of tankers — often ageing and uninsured — that de-activate transponders to avoid detection.

While tanker-tracking shows that China has remained Tehran’s main customer, official data registers no imports from the Islamic Republic in the past year. Instead, purchases have soared from Malaysia, where Iranian cargoes are often sent for transfer to another ship, blurring the consignment’s origins.

“These ghost barrels are not counted in the official total,” said SVB founder and president, Sara Vakhshouri. But “while the whole of OPEC+ is trying to cut as much as possible, and Saudi goes with a voluntary cut, every barrel counts.”

Chinese refiners — especially smaller, independent companies in Shandong province — are ramping up purchases of Iranian cargoes as the price discounts offered by Tehran help offset a recent slump in profit margins, Kpler says.

Iran has had to deepen discounts to its crude to compete with an influx of Russian crude pushed out of Europe by sanctions, according to Iman Nasseri, managing director at FGE in Dubai. The increased flow is drawing heavily from crude it had stockpiled on tankers to satisfy the demand, the companies say.

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“China’s willingness to support Iran by taking its sanctioned oil, suggests a slight improvement in Iran-China relations,” said Greg Brew, an analyst at consultants Eurasia Group. “All of this supports the view that Iran’s position is improving, along with its advancing normalisation with other regional states.”

It was Beijing that brokered the fledgling détente between Iran the Saudis — a symbol of the growing closeness both countries seek with Asia’s rising power — as the Middle East rivals seeking to defuse decades of proxy conflicts, such as the ongoing war in Yemen.

Besides the increased appetite from China, some analysts have speculated that the surge has been tacitly permitted by a US government intent on keeping petrol prices in check. Turning a blind eye could also help as the two countries work on a building a diplomatic channel.

“There’s been less enforcement of the sanctions by a US administration wanting to counter Russian crude in the market while also keeping supply flowing,” said FGE’s Nasseri.

The impact on oil prices from Tehran’s comeback could be limited going forward. Crude deliveries to China may slow while authorities conduct a crack-down on bitumen mixture, which traders suspect is used as a cover for denser and cheaper barrels sold by Iran.

In any case, global oil markets are set to swing into a sharp deficit for the rest of the year as China’s post-pandemic rebound gathers pace, the IEA predicts. Demand will exceed supply by roughly 2 million barrels a day in the second half of the year, more than enough to absorb additional Iranian flows.

Crude traders remain sceptical of the projected supply tightness, in part as the swelling tide of barrels from Iran casts a shadow on the outlook.

“Negative supply side anxiety is palpably shaping the mood,” said Tamas Varga, an analyst at broker PVM Oil Associates Ltd. in London, adding that extra Iranian flows are part of that.

Bloomberg

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