December 20-2013
by Warren L. Nelson
Iranian oil exports were at an abnormally low rate last month, even for the 17 months since punitive sanctions were imposed.
The Paris-based International Energy Agency (IEA), a grouping of 28 major oil importers that mirrors the 12-nation Organization of Oil Exporting Countries (OPEC), estimated Iran’s oil exports for November at 850,000 barrels a day, the third lowest monthly total for the 17 months since severe sanctions were imposed in July 2012.
Many news organizations, however, failed to look at the full history of monthly figures and only reported that Iran’s exports had risen in November from October’s 760,000 barrels a day, saying that showed sanctions were failing in the light of the new nuclear agreement with Iran.
For example, The Times of Israel reported, “Iranian oil exports rose 10 percent in November after sanctions against the Islamic Republic were eased as part of an interim deal with world powers, the International Energy Agency reported Wednesday.”
And Iran’s state broadcaster said the IEA “has announced that Iran’s crude oil exports are rebounding in the wake of a recent nuclear deal between the Islamic Republic and the six major world powers.”
But the IEA said nothing of the sort. Interestingly, both The Times of Israel and Iran’s state broadcaster were telling the same falsehood.
The nuclear agreement could have no impact on the November export figures. The agreement was signed November 24. The IEA figures are based on reports from countries receiving Iranian oil. But no oil could be ordered. loaded, shipped and received in the one week left in the month of November after the agreement was announced.
The world will have to wait until the December figures to see if there is any change after the signing of the agreement.
The December figure can be expected to be higher since both the October and November figures are so low—the lowest and third lowest monthly figures since sanctions took effect. (The second lowest was 835,000 barrels day in April.)
Iran’s oil exports for the first 11 months of 2013 averaged 1.005 million barrels a day, just a hair over 1 million. That is down from the average of 2.5 million that prevailed for the two decades before, or a reduction of 60 percent.
However, the reduction in sales comes while the price of an OPEC barrel has been unusually high. For three years running now, an OPEC barrel has sold for more than $105 a barrel, triple the average of the previous half dozen years.
In November, the IEA said, China significantly boosted its purchases of Iranian oil and Taiwan bought one Iranian cargo, the first time it has bought any since April. But it said Japan, South Korea and Turkey cut their Iranian crude buys in November. Turkey cut its purchases even though Turkish officials, trying to sound tough and vocally opposing US pressure, had sworn they would not reduce their buys any further,
Importantly, the IEA scoffed at talk that the November nuclear deal would result in any significant increase in Iranian oil sales since the US threat to sanction banks in countries that buy more oil remains in place, as do all the restrictions on banking transactions with Iran. This, the IEA said, “leaves on the face of it no room for any sustained increase in exports.”
But the IEA went beyond that and said that even if all sanctions were lifted tomorrow, Iran could not export more because damage to its oilfields will limit its ability to raise output. “Meaningful increases in production would require a longer period and additional investment in Iran’s upstream, and thus would take time to materialize,” the IEA said, without venturing any prediction on how much time and money would be required to get Iran’s exports back up to 2.5 million barrels a day.
The IEA’s figures for the most recent month are estimates based on inputs from traders and the shipping industry. The November figures will almost certainly change somewhat in the next monthly report from the IEA, when the IEA will have official customs figures. The October figure published this month is 760,000 barrels a day, an upward revision from the 715,000 barrels estimated for October in last month’s IEA report.
Iran used to be the second largest producer—including oil for both exports and domestic use—in OPEC with Saudi Arabia first. Now, of OPEC’s 12 members, Iran ranks sixth, after Saudi Arabia, Iraq, the UAE, Kuwait and Venezuela.
