FACTBOX: President of Iran, OPEC's third largest crude producer, killed in helicopter crash

Iranian President Ebrahim Raisi and other officials died in a helicopter crash May 19, state television reported, as they were heading to inaugurate a project at the Tabriz oil refinery.

Raisi's death is unlikely to change oil policy in OPEC's third largest producer, according to analysts with S&P Global Commodity Insights, but it underscores the geopolitical risks underlying crude exports from the Middle East.

"Iranian oil policy depends fundamentally on Iran's relationship with China," its biggest customer, said Carlos Pascual, Commodity Insights' head of geopolitics and international affairs. "Unless Iran sees an Israeli link, then it is hard for me to see why a change would occur. Indeed, could we not see internal pressure to export more if they see a period of internal crisis and a need to increase revenue."

Foreign minister Hossein Amir-Abdollahian and other officials were also on the helicopter.

Trade flows

-- Iranian oil output has grown despite US sanctions:

• Iran exported around 1.5 million b/d of crude oil in the first quarter of 2024, with most heading to China, according to data from S&P Global Commodity Insights.
• Iran produced 3.15 million b/d of crude in April, according to the latest Platts OPEC+ survey by Commodity Insights, its highest since October 2018, despite western sanctions intended to heavily restrict purchases of Iranian oil.
• The US in late April imposed a series of new sanctions on Iranian oil trade, including penalties on foreign ports, vessels and refineries involved in importing or shipping Iranian petroleum products, though market sources said it has yet to have much impact on flows.
• Independent Chinese refiners continue to show interest in Iranian crude and fuel oil, though weak refining margins have weighed on recent imports, with April volumes of 4.54 million mt (1.11 million b/d) down 5.5% from March, according to data from Commodity insights.

-- Heavier grades supplied to Asia are key to Iranian flows:

• Much of Iran's crude production is of heavier grades and condensate, with key grades (in order of production volume) Iran Heavy, Iran Light, Forozan, Soroosh, Lavan, South Pars (condensate), Pars, Sirri, Koroosh/Cyrus.
• Iran 's heavy sour grades compete directly with crudes such as Saudi Arabia 's Arab Heavy, Arab Light and Arab Medium; Iraq 's Basrah Light, Basrah Medium and Basrah Heavy; Russia 's Urals; the UAE's Upper Zakum; Oman Crude Blend; Kuwait Export Crude; Venezuela 's Mesa 30 and Merey 16; and Mexico 's Mata, among others.
• Iran also produces and exports ultra-sweet low sulfur oil or condensates, especially from South Pars, which is similar in quality to condensates produced by Norway, Qatar, the US and Australia.
• The helicopter crash follows an attack by Iran-backed Houthi militia on the Panama-flagged and Greek-owned Wind oil tanker off the coast of Yemen on May 17. It was heading to China after last being observed at Port Said North Anchorage Zone One, according to S&P Global Commodities at Sea. However, the US military said the ship had most recently docked in Russia.
• Houthi attacks on shipping in and around the Red Sea have surged since the start of the Israel-Hamas war, prompting many vessels to avoid the region and take the costlier and more time-consuming route around Africa's Cape of Good Hope.

Pricing

-- Oil markets have initially shrugged off high geopolitical risks following Raisi's death:

• Crude futures have edged higher since news of Raisi's death broke. As of 0547 GMT, front-month ICE Brent was trading at $84.31/b, up 33 cents/b from the previous close, while NYMEX crude was at $79.86/b, up 25 cents/b
• Platts, a part of S&P Global, assessed Dated Brent at $82.44/b on May 17, down from over $93/b in early April, which some analysts attribute to an easing of geopolitical risk in recent weeks.
• For its Asian customers, state-owned National Iranian Oil Company set the May official selling price of its flagship Iran Light at a premium of $2.25/b over the average of Platts Oman /Dubai assessments, up 30 cents/b on the month, while the OSP for Iranian Heavy was raised 50 cents/b to a premium of 5 cents/b to the same benchmark
• The president's death comes as oil ministers from OPEC and its allies were preparing to gather in Vienna on June 1 to decide on production quotas for the coming months, with analysts widely expecting a rollover of the deep voluntary output cuts implemented by Saudi Arabia, Russia and several other members.
• Iran, whose oil minister Javad Owji was not on the helicopter, is exempt from an OPEC+ quota, along with Libya and Venezuela.

Infrastructure

-- Iran depends on the Strait of Hormuz to export its crude to international markets:

• Iran loads most of its oil at ports in the Persian Gulf, primarily at the Kharg Island oil terminal
• Iran in 2021 began shipping crude from a new terminal at Jask, on the Oman Sea coast, with a 1 million b/d capacity pipeline from the West Karun oil fields beginning operations at an initial 300,000 b/d flow rate
• Iran has its own fleet of 60 tankers and, in the past, has used its vessels as floating storage