Iranian oil tankers in search of a buyer

• After US president Barrack Obama visited India in February Indian government have asked the local refiners to reduce the purchase of Iranian crude and keep the level in line with previous year's import.

• In January 2015 India imported 274,000 barrels/day compared to 348,000 barrels/day in December 2014 of Iranian crude. The imports are expected to go down further down the year. This could be one of the contributors of yesterday's price rise by Saudi Arabia as India and China looking to other sellers.

• This has led to rise of Iranian crude getting stuck and stored in offshore tankers. As per latest data from EA Gibson shipbrokers the amount could be as high as 37 million barrels.

• Iranian supply also reduced to China to 470,000 barrels/day down by 22 percent from December 2014. Shipments were reducing to South Korea too, down by almost 50 percent.

Analogy -

• Part of the story is sanctions imposed on Iran taking an effect on Iranian crude, but when the demand is high or supply is short it is very unlikely for a basic raw material for the economy to get stuck.

• These conditions not only expose the trouble Iran might be facing over the sanctions but also the existence of excessive supply.

• The current Nuclear Negotiation between Iran and western allies if successfully concluded would open up huge supply from Iran. Iran has the 10 percent share of proven reserve of global crude oil.

Under the current circumstance it would be difficult for crude oil to reverse the course of its decline big time, instead may continue to move sideways with bearish bias.