Sanctions Force Iran To Cut Crude Oil Output

March 15, 2018

 Iran has cut its crude oil production by 5,000 barrels a day, a recent report by OPEC said. The report indicated that Iran’s daily oil production stood at 3.0818 and 3.0813 million barrels in January and February, respectively.

A report released by Iran, however, said that the country produced 3.0817 and 3.0810 million barrels a day in January and February, respectively. That would indicate a reduction of 7,000 barrels a day.

Iran produced 3.0822 million barrels of crude oil in the last quarter of 2017, down from 3.0833 million in the three previous months. The country produced an average of 3.0811 million barrels of crude oil a day in 2017, which was higher than the 3.0515 million barrels produced in 2016. 

Iranian Heavy, one of the country’s main grades for export, sold for $65.85 and $62.27 a barrel in January and February, respectively, a 5.4 percent drop in price. The average price for Iranian Heavy has been $64.14 a barrel so far in 2018, which shows an average increase of more than $11 a barrel compared to the same period in 2017. 

OPEC’s oil output for February fell to a 10-month low with only 320,186 barrels a day. It was a massive drop of 77,000 barrels a day compared to January. While, Iraq, UAE, and Venezuela lowered their output, Angola and Nigeria increased theirs.  

A recent report by the International Network of Universities (INU), which quoted an unnamed source familiar with the loading and discharging of oil tankers, said that Iran’s crude oil and natural-gas condensate output would drop sharply in March, compared to the last two years. The report cited a decrease in demand by Iran’s chief Asian customers. The report projected that Iran’s most significant accounts would only buy 1.94 million barrels a day in March, which would mean a 21 percent drop in demand compared to February.

The report speculated that the lower output was the direct result ofh U.S. sanctions.

The possibility of the U.S. withdrawing from the JCPOA (Joint Comprehensive Plan of Action), better known as the Iran nuclear deal, has a significant impact on the oil market. The sanctions also place severe constraints on oil insurance companies that don’t wish to jeopardize their access to the American financial market. Some Japanese insurance companies that work with the Iranian oil industry are already worried about future U.S. sanctions. These and other factors scare many of Iran’s current customers.