Sanctions choke off 40% of Iran’s oil exports, says agency

IRAN’s oil exports have fallen by about 40% since the start of the year as western sanctions affect its vital oil industry, the International Energy Agency warned yesterday.

The agency, which represents the interests of major consuming nations, said preliminary indications suggested exports fell to 1,5-million barrels a day in April-May from 2,5-million at the end of last year.

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

It said it believed Iran was still producing 3,3-million barrels a day, 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 US 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 programme is for civilian purposes.

The European Union will impose a full embargo on Iran’s oil from July 1. The measure will also in effect cut off tanker insurance, a major problem for Asian buyers who traditionally account for the bulk of Iran’s sales. The report came out days ahead of talks in Moscow between Iran and six world powers.

The Organisation of the Petroleum Exporting Countries (Opec), of which Iran is a member, will meet in Vienna this week to discuss production running at a multiyear high. US 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 a barrel on signs of slowing economic growth in China, and an escalation in Europe’s debt crisis.

The International Energy Agency said the world was better supplied now than in recent years but warned against calling it an oversupplied market. “Nobody knows exactly how oil supplies will develop this (winter). Memories are indeed short: crude prices remain very high in historical terms, and are acting as a drag on household and government budgets in (developed) and emerging markets alike.”

The agency said other bullish factors for oil prices included power sector oil demand in the next few months and stockpiling by major nondeveloped economies including China, which have been accumulating crude in the months ahead of the Iranian embargo.

Its view contrasted with those of Opec and the US which said on Tuesday global oil markets could loosen further. Reuters