Energy Agency: If Production Cuts in Iran and Venezuela Are Not Compensated, Oil Prices Will Exceed $80

While the International Energy Agency has warned about rising oil prices due to production declines in Iran and Venezuela, reports indicate that millions of barrels of unsold Iranian oil are being stockpiled in the Persian Gulf. In its monthly report on Thursday, September 22, the International Energy Agency stated that Iran's daily oil exports have decreased by about 500,000 barrels since the U.S. withdrawal from the JCPOA until last month, and it remains to be seen how long this decline will continue. The report adds that Venezuela's oil production continues to decrease each month, having reached 1.24 million barrels last month, and if this situation persists, it will fall to one million barrels by the end of the year. Venezuela's oil production has dropped by 42% over the past two years. The report warns that if the declines in oil production from these two countries are not compensated by other producers, oil prices will soar above $80. Data from Thursday shows that Brent oil prices have approached $80. Over the past month, oil prices have fluctuated between $70 and $80, causing significant confusion and turbulence in the oil market. The agency states that Iran's daily oil production has also decreased by about 200,000 barrels. However, OPEC's estimates indicate that the decline in Iran's oil production since the U.S. withdrawal from the JCPOA in September has been about 235,000 barrels. Thus, the decline in Iran's oil exports is 2.5 times greater than the decline in the country's production. Reports indicate that Iran is stockpiling excess oil in tankers. Bloomberg reported on May 21 that Iran has resumed stockpiling its unsold oil in tankers anchored in the Persian Gulf. During the first round of sanctions (2012 to 2015), Iran had stored tens of millions of barrels of unsold oil in tankers for months and later sold them after the JCPOA. According to Bloomberg, in the past three weeks, at least 13 million barrels of oil and three million barrels of gas condensate from Iran have been stored and maintained in tankers owned by Iran in the Persian Gulf. Meanwhile, reports indicate that Iran's daily oil and gas condensate exports will decrease by another 550,000 barrels this month compared to last month, reaching about 1.5 million barrels per day, with still two months remaining before the start of U.S. oil sanctions. South Korea and France have completely halted oil purchases from Iran, and all of Iran's customers have reduced their oil purchases from the country in the past month. In the previous round of sanctions, Iran's oil and gas condensate exports fell from 2.5 million barrels to about 1.1 million barrels, but this decline occurred over a longer period. Bloomberg, citing an assessment from BNP Paribas, reported that the decline in Iran's oil exports is occurring at a very high rate. Bloomberg writes that among OPEC members, there is still excess production capacity of 2.6 million barrels of oil, most of which belongs to Saudi Arabia and Iraq. Global daily oil demand growth next year will only be 1.5 million barrels, but only non-OPEC countries will increase production by more than two million barrels. This has somewhat reassured global oil markets, but the point is that each refinery is designed for a specific type of oil, and not all oils can easily replace Iranian or Venezuelan oil.