OREANDA-NEWS. Italian refiner Saras said it has signed an oil supply contract with Iran.

The company's contact with Iran has formally opened after banks began allowing payments "in the last couple of weeks," Saras chief executive Dario Scaffardi said today.

Saras still owes Iran money from debts accrued prior to sanctions being imposed on the country in 2012. "We will of course start repaying the debt we owe to Iran, and this is in the process of starting. We still have to negotiate exact timings," said Scaffardi.

Saras also said today the strong gasoline margins seen in the first three months of 2016 should continue through the year, and it will increase its gasoline and naphtha output. Gasoline production reached 96,000 b/d in teh first quarter, up from 94,500 b/d a year earlier despite crude runs falling to around 231,000 b/d from 300,000 b/d on the year. This meant gasoline took a 31.7pc share of Saras' output, from 25.5pc in the same quarter a year ago.

Crude runs fell as the firm undertook maintenance at its 300,000 b/d Sarroch refinery, including to a hydrocracker and vacuum distillation unit. Saras said some work has been undertaken in the second quarter to a topping unit, which should restart this weekend. Some "modest maintenance" will be carried out in the fourth quarter, Saras said without specifying which units will be affected.

Saras will this year move to sell unfinished gasoline and oxygenates and gasoline blendstocks, which it said are proving extremely lucrative.

Saras' refining margins were $7.60/bl in the first three months of this year, up from $6/bl in the same period a year earlier. But Saras was less positive on the outlook for diesel margins, saying weakness is likely to continue in the remainder of this year, affected by imports of middle distillates.

The company also said it wanted to branch out into low sulphur bunker fuel, something it had previously produced little of, in order to exploit price differentials between crude grades. In the first quarter of the year Saras increased what it describes as medium sour crude grades, to 34pc of throughput compared with 11pc in the first quarter of 2015. Light sweet grades fell from 48pc to 36pc.

Saras made a loss of €200,000 ($228,000) in the first quarter of the year, compared with a profit of €74mn in the same period in 2015, largely a result of negative crude inventory impacts. Saras's adjusted profit, which includes a different methodology in the evaluation of its oil and product inventories, was €40.2mn, compared with €54.5mn in the same period a year earlier.