16% Drop in Iran's Oil Exports to India Amid Surge in Saudi Production

Reuters reports, citing shipping and industrial sources, that due to the return of U.S. sanctions, India's oil imports from Iran decreased by 15.9% last month (June) compared to the previous month, reaching 592,800 barrels per day. The U.S. exited the JCPOA in May, and Iran's oil sanctions will be reinstated in November. Reuters states that India is reducing imports to avoid U.S. sanctions. This report, published on Wednesday, July 10, indicates that the reduction in oil purchases from Iran comes as India increased its total oil imports by over 10% last month. The U.S., Azerbaijan, Mexico, and Middle Eastern producers have increased exports to India. Reuters notes that two private refineries, Nayara and Reliance, intend to completely stop buying oil from Iran and purchased only a minimal amount from the Islamic Republic last month, while state-owned refineries increased their purchases of Iranian oil by 10% in June. Recently, Reuters also reported that the Indian government has asked all refineries that are customers of Iran to be prepared to stop buying oil from the country. Over the past year, India significantly reduced its oil purchases from Iran due to pressure on Iran to agree to a contract for the development of the Farzad B gas field with India. However, following Iran's agreement to grant this project to Indian companies, India increased its oil purchases by 24% in the first quarter of the current Indian fiscal year, which roughly coincides with the solar year, reaching 647,000 barrels per day. The Organization of the Petroleum Exporting Countries (OPEC) also published its monthly report on Wednesday. This report states that Saudi Arabia increased its daily production by over 405,000 barrels last month, while Iran's production decreased by nearly 23,000 barrels. OPEC members agreed last month to increase their production starting July 1 due to the decline in production from Venezuela and Libya, but no specific increase amount was mentioned. The OPEC agreement only stated that OPEC and allied countries led by Russia were to reduce their daily production by 1.8 million barrels, but in practice, due to the drop in production from some of these countries, the reduction has reached 2.8 million barrels, which must return to the agreed level. This agreement has opened the door for various interpretations. Iran's interpretation was that only countries that have experienced significant production declines should be allowed to increase their production. However, Saudi Arabia, Russia, and some other OPEC members believe that any country capable of increasing production should contribute to the increase. The significant increase in Saudi oil production comes as it is expected to grow at least by the same amount this month, a situation that has provoked a response from Iran, with the Iranian oil minister recently sending a letter to OPEC. Libyan oil production decreased by 254,000 barrels per day last month due to a resurgence of unrest. Venezuela, which faces monthly production declines, also lost 47,000 barrels per day in June. This country has lost one-third of its production capacity over the past two years due to lack of oil investments and economic problems, and this decline continues. The International Energy Agency recently predicted that this country's daily production would drop by about 550,000 barrels by the end of 2019.