The EU embargo on imports of Iranian oil has yet to come into force, but tightening sanctions against the Islamic Republic are already making a big dent in its crude exports, according to the International Energy Agency.
The IEA reckons that oil-importing countries bought nearly 1 million b/d less crude from Iran in April and May than in late 2011 as a result of the sanctions.
In terms of production, Iran has so far not suffered much, the agency said, with output of 3.3 million b/d in May unchanged from April and only down slightly from 3.5 million b/d at the end of 2011.
But this respite may be temporary, as with export markets drying up and storage space filling up Iran may be left with no choice but to cut production at its oil fields.
Indeed, if sanctions are fully implemented -- since apart from the European Union embargo due to come into effect July 1, there are also US sanctions aimed at deterring Iran's other customers from buying the country's crude -- then Iranian oil production may be cut by as much as 1 million b/d in the second half of this year, the agency said.
Even before the EU embargo comes into force, European buyers have halved their imports of Iranian crude to around 300,000 b/d in May. By early July, that volume should drop to zero.
Sales of Iranian crude to some of its major customers in Asia won't see such a drastic reduction, but even there the trend is generally downward. If its exports keep dwindling, surely it can only be a question of time before Iran's oil production follows.
To subscribe or visit go to: http://www.platts.com