Iran’s Oil Production Reaches 20-Year Low
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Iran’s oil output has fallen dramatically since the most recent European and US sanctions came into effect on July 1. However, analysts have warned that the “full scale of the Iranian sanctions is yet to be seen”.
Iran’s oil output has fallen dramatically since the most recent European and US sanctions came into effect on July 1. However, analysts have warned that the “full scale of the Iranian sanctions is yet to be seen”.
The FT reported yesterday that Iranian oil production reached 3.2 million barrels last month, its lowest level since 1992, and below the “depressed level of 1999”, “when members of the OPEC oil cartel implemented draconian production cuts to shore up oil prices, which had fallen below $10.”
The sharp decline has gone beyond the expectations of the West who have led the sanctions against Iran amid heightened diplomatic tensions over Iran’s nuclear programme.
According to the US Department of Energy, oil exports account for 80 percent of Iran’s total export, and represent 50 percent of government revenue.
However, analysts say production is set to fall even further this month.
Data provided by oil traders suggest that Iranian exports will drop to approximately 1.1 – 1.3 million barrels in July. Oil production, too, is expected to fall below the 3 million barrel per day benchmark – a first since the late 1980s.
Iran has since resorted to trickery and intimidation, such as conducting war games along the Strait of Hormuz – a crucial waterway for oil tankers – as well as putting on disguises for Iranian-register tankers.
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Iranian consumers appear to be the hardest hit, as the prices of basic commodities such as bread and milk soared by 30 percent in the last month, and the rial continued on its devaluation trend.
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However, Russia’s energy market has benefitted from the sanctions albeit at the expense of the Iranian oil economy.
As a short term substitute to Iranian crude, oil traders and refiners have been scrambling for Urals, a low quality, high sulphur crude produced in central Russia.
Urals are largely comparable to the quality of Iranian crude, making it an ideal replacement.
According to another report by the FT, “Russian crude is now trading at a hefty premium of 52 cents per barrel over Brent, having swung from a discount of as much as $1.60 per barrel in mid-June”.
Related News: Russia to Benefit From Western Sanctions On Iran
