Iran oil exports plummet as sanctions bite
Reuters reported that Iran's oil exports have fallen by an estimated 40% since the start of the year as Western sanctions tear into the country's vital oil industry.
The International Energy 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 to May from 2.5 million at end 2011.
IEA said that in months ahead, Iran may need to shut in production volumes if export markets remain similarly constrained and storage fills up. It believed Iran was still producing 3.3 million barrels per 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.
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 program is for civilian purposes.
The European Union will impose a full embargo on Iran's oil from July 1st 2012. 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 Organization 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. US ally Saudi Arabia has been stepping up supply to replace lost Iranian barrels.
Earlier this year, oil prices rallied to USD 128 per barrel, their highest since 2008, on fears of a loss of Iranian production. But they have since fallen below USD 100 per barrel on signs of slowing economic growth in China, weak US data and an escalation in Europe's debt crisis.
The IEA said that 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.
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 barrels per day. Its view contrasted with reports by OPEC and the US government which said 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 barrels per day higher for the second half of 2012 at 30.9 million barrels per day. The figure was still 1 million barrels per day higher than OPEC's current production levels.
Source - Reuters