By Alaric Nightingale

February 8, 2010

Source: Business Week/ Bloomberg

Feb. 9 (Bloomberg) — Iran, OPEC’s second-largest crude producer, has at least three supertankers idling in the Persian Gulf, as oil prices decline five weeks before the group’s next meeting, vessel-tracking data show.

The tankers, each bigger than the Chrysler Building, have been almost stationary for at least four weeks, according to data from the ships collected by AIS Live Ltd. The depth of the 2-million-barrel vessels sitting in the water indicates they are loaded. The amount of oil stored may expand because signals from two more idled tankers shows they are partially loaded or empty.

The Organization of Petroleum Exporting Countries, accounting for about 40 percent of global supply, meets March 17 in Vienna to discuss production quotas after raising output in eight of the last 10 months. Two years ago, Iran used as many as 14 tankers to store oil when purchases by refiners declined.

“We are entering the season when there should be some low demand from Japan, which is a big user of Iranian crude,” Olivier Jakob, managing director of Zug, Switzerland-based oil consultant Petromatrix GmbH, said by phone. “When you have some floating storage, from Iran or from pure traders, it always adds a bit to the feeling there’s spare capacity available.”

Seifollah Jashnsaz, managing director of the National Iranian Oil Co., and the company’s manager of international affairs, Ali Asghar Arshi, didn’t immediately respond to phone calls. Deputy Oil Minister Hossein Noghrekar Shirazi declined to comment. Mohammad Ali Khatibi, Iran’s OPEC governor, referred calls to NIOC because he isn’t responsible for oil marketing.

Cushing, Oklahoma

If full, the three tankers’ combined capacity of about 6 million barrels is equal to 19 percent of all the crude the U.S. Energy Department estimates is stored in Cushing, Oklahoma, the pricing point for benchmark West Texas Intermediate oil.

The 1,100-foot Haraz has floated off the United Arab Emirates since Jan. 2 and the Huwayzeh arrived in the same area Jan. 10. The Najm has been near Iran since Jan. 4, according to the data from AIS Live, owned by Lloyd’s Register-Fairplay. Two other ships are in the area and may have partial loads or be preparing to store. The Dadgar has been near Iran since Jan. 1 and the Honar arrived in the area on Jan. 21.

Other Iranian tankers are also idled. The Nesa has been off Malta since December and the Davar off Benin in West Africa since November. The ships’ drafts indicate they’re both loaded. As well as being used for Iranian crude, the vessels are also leased out.

Crude Weakens

Crude prices have fallen for four weeks, the longest losing streak since July, on concern that European efforts to reduce budget deficits will curb growth just as their economies start to rebound. A faltering recovery may bolster the U.S. dollar and prompt the sale of commodities. Oil for March delivery traded at $71.66 a barrel on the New York Mercantile Exchange yesterday, 10 percent lower than at the start of the year.

Crude rose 82 percent in the last 12 months and the International Energy Agency expects global demand to expand 1.7 percent this year, after two annual contractions.

As Iran’s cargoes sit, oil companies and banks are selling crude stored on tankers into the market. The number of ships involved in the “contango” trade, named after the term used to describe a market where future commodity prices are higher than today, declined 16 percent last month, according to data from London-based E.A. Gibson Shipbrokers Ltd. The amount of crude tied up in storage fell 25 percent last week, Morgan Stanley said in a Feb. 7 report.

Crude-Oil Spread

The trade makes money as long as the difference between energy contracts exceeds the costs of ship rental, insurance and financing. A year ago, the spread between the first and sixth Brent crude-oil contracts traded on the London-based ICE Futures Europe exchange was 12 percent. It’s now 4 percent. The return of stored cargoes suggests the trade is less profitable and traders anticipate a further narrowing of the spread.

Iran may have a surplus of high-sulfur crude as refineries that process the fuel prepare to shut down for maintenance. The discount on Iran Heavy crude compared with Oman and Dubai petroleum widened to 65 cents a barrel, from 41 cents at the end of last year, according to data compiled by Bloomberg. World oil supply is sufficient to meet demand during the first half of this year, Iran’s OPEC governor, Khatibi, said yesterday.

Storing crude on tankers ties up vessels and bolsters rental rates. Iran’s storage in 2008 contributed to a tripling in the cost of chartering supertankers. Daily charter rates on the Saudi Arabia-to-Japan route, the industry’s benchmark, advanced 5.3 percent to $42,349 this year. Frontline Ltd., the world’s biggest operator of the vessels, needs $32,900 a day to break even.

–With assistance from Ali Sheikholeslami in London and Ayesha Daya in Dubai. Editors: Stuart Wallace, Tim Coulter

To contact the reporter on this story: Alaric Nightingale in London at +44-20-7073-3488 or Anightingal1@bloomberg.net

To contact the editor responsible for this story: Stuart Wallace at +44-20-7673-2388 or swallace6@bloomberg.net