In just the last month, Iran exported 300,000 fewer barrels per day (bpd) compared to March, falling to around 1.1 mb/d.
“Further tightening of sanctions on Iran will have an impact on its export capacity,” the IEA, a watchdog for oil consuming countries, said in a statement Tuesday.
“Iranian shipments of crude and condensates are running around 1.1 million barrels a day (mb/d) in April, 300 000 barrels a day lower than March, and 1.7 mb/d lower than May 2018,” it added.
Washington imposed sanctions on Iran’s oil sector – the Islamic Republic’s main source of revenue – in November 2018 after withdrawing from the 2015 Iran nuclear deal.
US President Donald Trump said the deal did not prevent Tehran from developing nuclear capabilities and ballistic missile technology, nor did it stop it from sponsoring or engaging in terrorism.
The US initially granted seven major importers of Iranian crude a waiver period in which to wean off Iranian oil and find alternatives.
On Monday, however, US Secretary of State Mike Pompeo announced no further waivers would be authorized after May.
Oil prices jumped by around three percent in response to the news.
“Today I am announcing that we will no longer grant any exemptions. We are going to zero. Going to zero across the board,” Pompeo told reporters in Washington.
The Secretary of State estimated US sanctions have already denied Iran more than $10 billion.
Pompeo sought to reassure markets that the shortfall created by the loss of Iranian exports would be plugged and prices would remain stable.
The loss of Iranian crude on the oil market is expected to be met by US oil supplies, which the IEA expects to grow by 1.6 mb/d this year.
The large global spare production capacity of 3.3 mb/d created by recent OPEC+ supply cuts is also expected to allow Saudi Arabia and the United Arab Emirate (UAE) to absorb Iran’s market.
“The International Energy Agency is monitoring developments in global oil markets, and notes that markets are now adequately supplied, and that global spare production capacity remains at comfortable levels,” the IEA said.
It did however warn producers to take steps “to avoid higher oil prices that will prove painful to all alike”.
Not everyone is reassured or satisfied by the US move. Iranian oil customer China says it “firmly opposes the US implementation of unilateral sanctions and its so-called long-armed jurisdiction”.
“The relevant move by the United States will intensify the turmoil in the Middle East and the turmoil in the international energy market,” foreign ministry spokesman Geng Shuang told a press briefing on Tuesday, AFP reported.
The suspension of waivers followed a US decision to list Iran’s powerful Islamic Revolutionary Guard Corps (IRGC) and its extraterritorial Quds Force as a foreign terrorist organization (FTO) alongside al-Qaeda, Islamic State (ISIS) and others.
The move is significant as, unlike these non-state terror groups, the IRGC is effectively a state entity. The elite guard, which answers only to Iran’s supreme leader Ayatollah Ali Khamenei, is also tightly bound up in Iran’s economy, including construction, oil and gas, and even missile technology.
The IRGC terror designation could have dire consequences for Iraq, whose armed forces have close ties with the Iranian Guards.
Iraq also depends on Iranian energy exports to power homes and businesses, particularly in the southern Iraqi city of Basra, where power blackouts last summer led to deadly rioting.
