LONDON/PARIS: Iran’s oil production has dropped to its lowest level since the 1980s as the full force of US sanctions weighed on exports, the International Energy Agency (IEA) said on Friday.
The US in November reimposed sanctions on exports of Iranian oil after President Donald Trump pulled out of a 2015 accord to curb Tehran’s nuclear program. Eight economies, including China and India, were granted waivers for six months — which expired at the beginning of May.
That has had a huge impact on Iran’s energy industry, with production plunging by 210,000 barrels per day (bpd) in May to 2.4 million bpd, its lowest levels since the Iran-Iraq war, the IEA said. Exports fell by 480,000 bpd to 810,000 bpd — less than a third of what it was exporting a year ago.
The IEA said sanctions have not yet completely cut off Iranian oil exports, but they have fallen drastically. It added that it was becoming difficult to determine where Iranian oil was being shipped as Iran’s national oil company shut off satellite tracking systems on its ships.
The news came as the Paris-based IEA, which coordinates the energy policies of industrial nations, revised down its global 2019 demand growth estimate by 100,000 barrels to 1.2 million bpd, but said it would climb to 1.4 million bpd for 2020.
“The main focus is on oil demand as economic sentiment weakens ... The consequences for oil demand are becoming apparent,” the IEA said in its monthly oil report. “The worsening trade outlook (is) a common theme across all regions.”
The oil demand growth forecast assumes the maintenance of US and Chinese tariffs imposed on goods in 2018, but the IEA said it had not factored in further US tariffs announced in May.
The IEA also attributed lackluster demand growth in the first half of the year to a slowdown in the petrochemicals industry in
Europe, warmer than average weather in the northern hemisphere and stalled US gasoline and diesel demand.
Demand growth was likely to pick up to 1.6 million bpd in the second half of the year on government measures to mitigate the economic slowdown and robust consumption in the non-developed world.
“Stimulus packages are likely to support growth in the short term. In addition, the major central banks have stopped or slowed interest rate increases, which should support growth in (the second half of 2019) and 2020,” the IEA said.
US sanctions on Iran and Venezuela, an output cut pact by the Organization of the Petroleum Exporting Countries (OPEC) plus its allies, fighting in Libya and attacks on tankers in the Gulf of Oman added only limited uncertainty to supply, the IEA said. Surging US supply as well as gains from Brazil, Canada and Norway would contribute to an increase in non-OPEC supply of 1.9 million bpd this year and 2.3 million bpd in 2020.
The IEA’s latest monthly report comes a day after attacks on two tankers in the Gulf of Oman, which caused oil prices to briefly shoot more than 4 percent higher, in the second spate of incidents in a month in the strategic shipping lane.
With some 20 percent of the world’s oil passing through the Strait of Hormuz, a disruption to shipping could roil markets.