The US renewal of sanctions against Iran, effective Monday, will keep the market’s focus on the the impact that Washington’s efforts to penalize Tehran are having on the global oil market.
There have already been significant shifts in flows. One example is Iran boosting crude exports to the Chinese port of Dalian where bonded tanks are located.
Our friends at ClipperData have been keeping a close eye on this story. Their data shows the amount of crude offloaded in Dalian that was loaded in Iran averaged 463,000 barrels per day in October, up from zero in September and 61,000 b/d in August.
The early days of November show a decline month-on-month, but still easily exceed the levels seen prior to October (See Figure 1).
Figure 1
Source: ClipperData
Bonded storage allows the shipment owner to sell into China or customers elsewhere in the region.
Iran probably doesn’t have a customer lined up for supply placed in bonded storage, an interesting observation ahead of sanctions. In other words, sales could be less than exports.
Looking solely at the number of tankers departing Kharg Island (Iran’s main crude export facility) wouldn’t be sufficient to know whether US sanctions are deterring buyers because some of the supply could end up in bonded storage.
There are two areas of the Dalian port where oil storage tanks are located (See Figure 2).
Figure 2
Source: CartoDB, OpenStreetMap
Image Credit: Andrew Morse/Ursa
Other parts of the Dalian port are used for automobiles, containers, liquid chemicals, ore, grain, plus bulk and general cargo.
Media reports have identified Xingang Harbor as the section of Dalian where the bonded storages are found.
To locate Xingang Harbor within the Dalian complex we examined optical satellite imagery taken October 14, 2018, which showed a tank that was visibly damaged (See Figure 3).
That was an important clue. In 2010, a fire broke out at the Xingang facility. On that basis, we identified Xingang Harbor as sitting on the eastern side of the port of Dalian.
Figure 3
Source: Google Earth, CartoDB, OpenStreetMap
Image Credit: Andrew Morse/Ursa
There are five terminals at Xingang Harbor (See Figure 4). We know of two owners who have received permission from the Chinese government to operate bonded storage at Dalian. Figure 5 shows the pair of terminals associated with those owners circled in red.
Figure 4
Source: Google Earth
Image Credit: Andrew Morse/Ursa
Figure 5
Source: Google Earth
Image Credit: Andrew Morse/Ursa
Ursa monitors global inventories at 150 locations every week using synthetic aperture radar.
We filtered inventories by tank and isolated only those falling within the footprint defined above. The results show the Dalian bonded storage building last month (See Figure 6).
Our measurements show inventories rising from 11.09 million barrels on October 11 to 17.53 million barrels on November 1. The latter represents 58% of total capacity.
Figure 6
Source: Ursa
Changes in Dalian stockpiles will provide clues on Iran’s strategy. Will Tehran respond to US sanctions by diverting more supply to bonded storage?
