With the activation of the trigger mechanism the heavy oil discounts are on the way

With the approach of the trigger mechanism and the return of international sanctions, the discussion of Iranian oil exports has been heated to this comprehensive sanctions, according to Energy Press. The government says Snapback has a psychological burden for the people and the country rather than reality, and even if it is activated, the sale of oil will continue without interruption. Abdullah Babakhani, an energy expert on this issue, was dedicated to this issue to make it clear.

Iranian oil after the boycott; Increasing discounts instead of rising prices
Energy expert Abdullah Babakhani explains about the immediate impact of the trigger mechanism on Iran’s oil prices: The activation of the trigger mechanism usually increases the “sanctions risk” rapidly. In the Iranian market, this appears more discount than oil indicators (such as Dubai or Brent) instead of rising prices. As a result, Iran’s net prices decrease, as insurance, transportation and money transfer costs increase. Some cargoes may be delayed or moved through more costly methods such as shipping by ship and longer routes, which also lower the final price.

He added that by increasing legal and operational risks, buyers are demanding more discounts to offset the hazards of sanctions, transportation and payment. Even if the global price of oil is high, the price of Iranian cargoes may be lower than regional indicators. The discount depends on three factors: the intensity of secondary sanctions, competition with low -cost suppliers (such as Russia), and Iran’s flexibility to provide insurance, transportation and financial settlement facilities to reduce the buyer’s risk.
“Perceptual risk reduces the number of intermediaries for the transaction and increases the” risk cost “, the expert explained. This means more expensive insurance, higher fares, more profits of dealers, and more than buyers. Some banks and terminals stop cooperation and the process of settlement becomes more complex. As a result, Iran is facing a decline in net prices and an increase in the likelihood of cancellation or delay in loading, even if the nominal volume of exports is not reduced.

The stability of the mechanism of the trigger -depends on the actual supply reduction
The news of the activation of the trigger mechanism can shake paper prices in instant transactions, but the stability of this work depends on the actual disruption of the supply. According to Babakhani, if Iran’s exports are not tangible, the global market will return to equilibrium after a few days, the expert said: The global oil market usually reacts to geopolitical news, but the stable effect is formed when real currents are disrupted. About Iran, the primary reaction is more psychological (short -term fluctuation of paper prices); The durability of the work is that daily exports are really dropped or the cost of logistics and insurance is so high that effective supply to the market is reduced. Otherwise, the market adjusts after a few days.