Iran's oil exports plummet as sanctions bite, agency says

LONDON Wed Jun 13, 2012 11:48am EDT

Malta-flagged Iranian crude oil supertanker ''Delvar'' is seen anchored off Singapore March 1, 2012. REUTERS/Tim Chong

Malta-flagged Iranian crude oil supertanker ''Delvar'' is seen anchored off Singapore March 1, 2012.

Credit: Reuters/Tim Chong

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LONDON (Reuters) - Iran's oil exports have fallen by an estimated 40 percent since the start of the year as Western sanctions tear into the country's vital oil industry, the International Energy Agency said on Wednesday.

The agency, which represents the interests of major consuming nations, said preliminary indications suggested exports - the lifeblood of Iran's economy - fell to 1.5 million barrels per day in April-May from 2.5 million at end 2011.

"In months ahead, Iran may need to shut in production volumes if export markets remain similarly constrained and storage fills up," the IEA said in its monthly report.

It said it believed Iran was still producing 3.3 million bpd, down from 3.5 million last year and stockpiling unsold oil.

Tehran has denied it is experiencing problems with oil sales [ID:nL5E8HCK1I] despite mounting evidence its major customers, including China, are turning down offers of cheap crude under pressure from Washington to cut trade ties. [ID:nL3E8HC39L]

On Monday the U.S. government, which aims to choke off Tehran's oil revenue and force a halt to nuclear development it believes is aimed at making weapons, said India, South Korea, Japan and Turkey have made significant cuts to oil imports from Iran.

Iran says its nuclear program is for civilian purposes.

The European Union will impose a full embargo on Iran's oil from July 1. The measure will also effectively cut off tanker insurance, a major problem for Asian buyers who traditionally account for the bulk of Iran's oil sales.

The IEA report came out days ahead of nuclear talks in Moscow between Iran and world powers - the United States, Britain, France, Germany, Russia and China.

The Organisation of the Petroleum Exporting Countries, of which Iran is a member, will meet in Vienna this week to discuss production running at a multi-year highs. U.S. ally Saudi Arabia has been stepping up supply to replace lost Iranian barrels.

Earlier this year, oil prices rallied to $128 a barrel, their highest since 2008, on fears of a loss of Iranian production. But they have since fallen below $100 per barrel on signs of slowing economic growth in China, weak U.S. data and an escalation in Europe's debt crisis.

The IEA said the world was better supplied with oil now than in recent years but warned against calling it an over-supplied market. "Nobody knows exactly how oil supplies will develop this summer. Memories are indeed short: crude prices remain very high in historical terms, and are acting as a drag on household and government budgets in OECD and emerging markets alike."

The IEA said other bullish factors for oil prices included power sector oil demand this summer and stockpiling by major non-OECD economies including China, which have been accumulating crude in the past months ahead of the Iranian embargo.

The agency left its global oil demand growth forecast broadly unchanged at 820,000 bpd.

Its view contrasted with reports by OPEC and the U.S. government which said on Tuesday that global oil markets could loosen further in the second half of the year.

The IEA said its demand estimate for OPEC's oil also remained broadly unchanged although it was 1 million bpd higher for the second half of 2012 at 30.9 million bpd. The figure was still 1 million bpd higher than OPEC's current production levels.

(Reporting by Dmitry Zhdannikov; editing by Janet McBride)

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Comments (13)
Fromkin wrote:
Fact: Iran GDP has doubled in the last 5 years. Its economy, technological development and political clout have been groing contrasting with a decline for most western economies. It registers one of the highest technological growth index among developping nations. This is the reason for western animosity and propaganda against Iran.

Jun 13, 2012 8:45am EDT  --  Report as abuse
TruthMonitor wrote:
This article is part of Reuters’ steady stream of anti-Iran propaganda. Nothing new here folks; according to Reuters, the sanctions have been “biting” for years now. Has Iran fallen to its knees and surrendered? No. And it won’t. A trip to Iran (where Reuter’s doesn’t have much of a presence) would be sufficient to give the lie to this propaganda and validate Fromkin’s comment above. Is Barry enjoying his toy drone?

Jun 13, 2012 9:06am EDT  --  Report as abuse
libertadormg wrote:
This kind of news should put the NEOCONS on their heels and expose them for the warmongering folks they are. The Dick Cheney’s of the world are truly Darth Vader personalities that kill our soldiers for no security. Economic pressure and political isolation works if you give it a chance. Too bad it took so long for President Obama to get elected to begin this sane and responsible process.

Jun 13, 2012 11:47am EDT  --  Report as abuse
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