The International Energy Agency said on Wednesday Iran’s oil exports plummeted by an estimated 40% since the start of the year as US-led sanctions hit the country’s vital oil industry.
The IEA, which represents the interests of major consuming nations, said preliminary data suggested Iran’s exports fell to 1.5 million barrels per day in April-May from 2.5 million at the end of 2011.
“In months ahead, Iran may need to shut in production volumes if export markets remain similarly constrained and storage fills up,” the IEA said in its monthly report.
It added that Iran was still producing 3.3 million bpd, down from 3.5 million last year and stockpiling unsold oil.
The Islamic Republic denies it is experiencing problems with oil sales despite mounting evidence its major customers, including China, are turning down offers of cheap crude due to aggressive US-led sanctions.
The US government announced on Monday that India, South Korea, Japan and Turkey have made significant cuts to oil imports from Iran and exempted them from further sanctions.
Iran insists its nuclear programme is for civilian purposes.
The European Union’s set of embargo on Iran’s oil is coming into effect from 1 July. 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. However, Japan is considering proposals to provide cover for tankers bringing in Iranian oil.
The IEA report comes at a time when nuclear talks are about to take place in Moscow between Iran and world powers – the United States, Britain, France, Germany, Russia and China.
The Organisation of the Petroleum Exporting Countries, of which Iran is the second biggest producer, will meet in Vienna this week to discuss production running at a multi-year highs. Regional US ally Saudi Arabia has increased supply to replace lost Iranian barrels.
Oil prices rallied to $128 a barrel earlier this year, their highest since 2008, on fears of a loss of Iranian production. However, they have since fallen below $100 per barrel on signs of slowing economic growth in China, weak US economic data and an escalation in eurozone crisis.
“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,” the IEA noted in its report.
The agency left its global oil demand growth forecast broadly unchanged at 820,000 bpd.
The IEA said its demand estimate for OPEC’s oil also remained broadly unchanged although it was 1 million bpd higher for the second half of 2012 at 30.9 million bpd. The figure was still 1 million bpd higher than OPEC’s current production levels.