Iran Oil Output Plummets To 20-Year Low As Sanctions Bite

By Oliver Tree | May 02 2012 3:48 PM

Iran's crude oil production has hit its lowest level in 20 years, according to data released Wednesday, as a raft of international sanctions against Tehran begin to show their impact.

Malta-flagged Iranian crude oil supertanker "Delvar" is seen anchored off Singapore March 1, 2012. Western trade sanctions against Iran are strangling its oil exports even before they go into effect, a U.S. advisory body has found, amid warnings that any shortages will only push up crude prices and strain a weak global economy. REUTERS/Tim Chong

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Data from consultants JBC Energy showed Iran's output fell by 150,000 barrels per day over a two-month period, hitting a 20-year-low of 3.2 million barrels in April, the Wall Street Journal reported.

The last time production slumped to similar levels was in 1990, as the country struggled to recover from the Iran-Iraq war.

Tehran has been hit by a wave financial sanctions as Western nations, led by the U.S. and European Union, press the country to abandon its alleged pursuit of nuclear weapons technology.

The EU, for example, has enacted a ban on Iranian crude imports for member countries, set to come into force in July.

In a bid to comply with the sanctions regime, Iran's top oil buyers in Europe have been reportedly making substantial cuts in supply months in advance of the upcoming deadline.

Those that have reduced Iranian imports are filling the void with a range of replacement barrels from top exporters like Saudi Arabia, Iraq and Russia.

The European Union buys about 18 percent of Iran's total crude exports, with the UK and Germany receiving roughly 1 percent of their oil from Iran, while France gets about 3 percent.

European countries such as Greece, Italy and Spain are, however, much more reliant on Iranian oil.

According to EU data, Italy and Spain rely on Iran for 13 percent of its imports, while Greece receives fully one-third (33 percent) of its oil from Iran.

But while the effect of sanctions begin to seriously hit Iran, earlier this week it emerged that the Chinese government is considering insuring its private oil tanker fleet in a bid to work around EU sanctions.

India and South Korea, two of Iran's biggest customers, are also considering similar moves.

The move would nullify planned sanctions banning EU-based ship insurers and re-insurers -- who cover 90 percent of the world's tankers -- from covering vessels carrying Iranian crude, the head of China's shipowners' association told Reuters.