Iran Oil Output Not Rising

Iran is seeing bumper oil exports, but that does not imply a production uptrend.

OPEC’s third-largest producer ramped up exports in April to the highest since sanctions were eased more than two years ago. The jump came just weeks before a US decision on whether to pull out of the global deal that relaxed the restrictions, a move that would likely force Iran to cut hundreds of thousands of barrels a day, World Oil reported.

Crude shipments climbed to 2.48 million barrels per day last month from 2.06 mbpd in March, according to ship-tracking data compiled by Bloomberg. That coincided with a 4-mbpd drawdown from tankers storing oil at sea, tanker tracking showed.

“Iran managed a sizable month-on-month gain in exports, largely driven by the release of floating storage,” said in a note.

Refinery maintenance also explains why more barrels were available for export, according to consultant Energy Aspects. The increase in shipments reflects the halt of almost 100,000 bpd of Iranian refining capacity, rather than higher crude output, analyst Richard Mallinson said.

“Production is relatively flat right now” at about 3.8 mbpd, he said. “We certainly do not think it’s on the rise.”

The possibility of renewed sanctions on Iran has kept many international oil companies away, hampering the government’s ambitions to raise output. Even France’s Total SA signaled its plans may stall if it does not get an exemption from the US to do business in the country.

“If Iran wants to increase its output capacity to 4.5 or 5 mbpd, they will need major investments and technological advancements which they are lacking now,” said Iman Nasseri, an analyst at consultant FGE.

US President Donald Trump is expected to announce by May 12 whether he intends to withdraw the US from the global deal struck in 2015 that lifted certain restrictions on Iran. The potential reinstatement of sanctions, which had constrained its crude exports as well as its capacity to lure foreign investments, is the key risk to production, according to Mallinson.

“It would be sanctions or changes in the political environment that would have a more dramatic effect” on output than anything else, he said.