* Preliminary data suggest exports down by 1 mln bpd
* Production cuts ahead for Tehran
* Represents major upside risk for oil prices
By Dmitry Zhdannikov
LONDON, June 13 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
despite mounting evidence its major customers,
including China, are turning down offers of cheap crude under
pressure from Washington to cut trade ties.
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 says its nuclear programme 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. [ID: nL1E8HC62U]
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
(Reporting by Dmitry Zhdannikov; editing by Janet McBride)