International Energy Agency: 30% Decline in Oil Production Expected for Iran and Venezuela

The International Energy Agency states that oil production in Iran and Venezuela could decrease by 30% next year due to U.S. sanctions and poor economic conditions. In its latest monthly report published on Wednesday, June 13, the agency advises industrialized oil-importing countries that by the end of next year, oil production in Iran and Venezuela could drop by up to 1.5 million barrels per day, but other OPEC producers, as well as Russia and others, can 'easily' compensate for this decline. The report indicates that Iran's daily oil production could decrease by 900,000 barrels, equivalent to 23% of the country's total production, by the end of 2019. Following the U.S. withdrawal from the JCPOA, Iran's oil sanctions have been reinstated, and Iran's customers are forced to significantly reduce their oil purchases every six months to obtain waivers from U.S. sanctions. These sanctions will come into effect in November of this year, about six months from now. Venezuela's oil production is also declining by about 50,000 barrels per month due to economic problems and failure to attract foreign companies because of overdue debts. The International Energy Agency notes that over the past two years, Venezuela's daily oil production has decreased by about one million barrels. OPEC statistics released on Tuesday show that Venezuela's oil production fell below 1.4 million barrels per day last month, which is more than half a million barrels less than the average production last year. The International Energy Agency adds that the growth in oil production from non-OPEC countries next year could meet the growth in global oil demand, but an increase in Saudi production may also be necessary. OPEC members are set to meet next week to negotiate the issue of increasing production. Saudi Arabia, which alone accounts for one-third of the organization's production, strongly supports increasing production, while Iran, facing sanctions and production declines, calls for maintaining the current OPEC production levels. OPEC, along with some oil-producing countries led by Russia, has committed to reducing their daily production by 1.8 million barrels since the beginning of last year. This agreement is valid until the end of this year, but reports indicate that Russia and Saudi Arabia oppose continuing the current production cuts and have gradually increased their production since the beginning of this month. The agency states that even with a significant decline in production from Iran and Venezuela next year, global oil markets will not face problems, as other producers will compensate for it, but with further production declines, oil prices are likely to rise. In this context, Bloomberg has also reported, citing the International Energy Agency's report, that Saudi Arabia and other Middle Eastern countries are capable of increasing daily oil production by 1.1 million barrels in the short term and could produce even more additional oil next year. The report adds that global daily oil consumption will increase by 1.4 million barrels next year, while oil production from non-OPEC countries will rise by 1.7 million barrels, and only 31.6 million barrels of oil production will be needed from OPEC members, which is roughly equivalent to their production last month.