February 15, 2019
The Islamic Republic appears to be selling a little more oil than when Europe and the Obama Administration jointly throttled oil sales from mid-2012 through 2015. But the price of oil is now barely half what it was then, so Iran’s revenues are way down.
During that 3-1/2 year period, Iran generally sold an average of 1.15 million barrels a day of crude and condensates, according to the tabulation of the Paris-based International Energy Agency (IEA).
The IEA now reports that Iran sold 1.25 million barrels a day in November, the first month the Trump sanctions took effect, and 1.3 million barrels a day in December.
The January figures were due out just after the Iran Times went to press.
Before the Obama sanctions went into effect in July 2012 and before the Trump sanctions were imposed November 5, Iran routinely exported an average of 2.5 million barrels a day of crude and condensate.
But while Iran has counted on the Trump sanctions to drive prices up as rapidly as it drove Iranian sales down, that hasn’t happened. The average OPEC oil price since the sanctions were re-imposed in November has been under $60. From mid-2012 through 2015, the price was over $100.
The main reason for the price depression is that US crude production is soaring. The United States is now the largest oil producer in the world, having bypassed both Russia and Saudi Arabia last year.
The IEA called US output growth “staggering.” US production grew 2.1 million barrels a day in 2018, “the highest ever recorded by any country,” the IEA said. That growth compared with the 2.8 million barrels a day that was Iran’s total production in December. In 2019, the IEA expects US production to grow by another 1.3 million barrels a day—a huge threat to oil prices.
OPEC and its allies, mainly Russia, have pledged to cut output to bolster the price. They have cut output, although not as swiftly as anticipated. But the American production surge has made up for those cuts and kept the price from rising.
The surge in US production has nothing at all to do with Trump. The US government cannot direct production levels. Those decisions are made individually by the dozens of companies that produce oil across the United States. They can still make a good profit at $60 a barrel and have no incentive to cut production.
The price of an OPEC barrel was $71.36 the day before Trump reimposed sanctions November 5. Iranian sales then plummeted. But the international price slid at the same time, going down as low as $50 a barrel before recovering. The price in recent weeks has been around $60.
Iran is clearly not happy with its oil sales, though it avoids telling the Iranian public how much oil it is selling. But Oil Minister Bijan Namdar-Zanganeh complained bitterly February 5 that Italy and Greece aren’t buying any Iranian oil at all, even though the US in November gave them exemptions from sanctions good for six months.
The United States also gave six-month exemptions to Turkey, China, India, Japan, South Korea and Taiwan allowing them to buy about half as much oil as previously without triggering sanctions.
The key question now is whether those exemptions will be renewed when they run out May 5.
