Iran Vows to Keep Pumping as OPEC Ups September Output

Monday October 1, 2018

While the ability of other nations to offset crude losses from Iran as a result of the November wave of U.S. sanctions remains a hot point of analytical debate, there's little question that exports from the Islamic republic have already dramatically decreased - to their lowest level in over 2 years, according to tanker tracking data compiled by Bloomberg.

The news agency on Monday reported that observed shipments of crude and condensate dropped to 1.72 million barrels per day (bpd) in September, down 260,000 bpd from the previous month - the lowest level since February of 2016.

Crude and condensate shipments are now down 1.1 million bpd, or 39 percent, from April; France, the Netherlands, and South Korea bought no barrels last month, and declines were observed in flows to Italy and the United Arab Emirates.

All of this had an impact on output figures from the Organization of the Petroleum Exporting Countries (OPEC): a Reuters survey published Monday found that while the cartel pumped 32.85 million bpd in September (up 90,000 bpd from August's revised level and the highest this year), it actually cut output by 70,000 bpd because of declines in Iran and Venezuela.

The survey revealed that Libya, Angola, Saudi Arabia, and Nigeria provided the biggest output increases in September, while the biggest drop was provided by Iran at 100,000 bpd.

Norbert Rücker, head of macro & commodities research at Julius Baer, offered the familiar comment that "The supply situation looks fragile indeed, as any additional shortfall such as a deterioration of the situation in Venezuela would tighten oil supplies."

Despite the woeful numbers from Iran, and with arguably the only weapon left in its arsenal being bluster with regards to the current state of its crude industry, the Islamic republic declared on Monday that it has no plans to cut output and is experiencing no issues with receiving income from oil sales.

The message was delivered by Ali Kardor, the head of state-run National Iranian Oil Company, who added that his country's oil income has increased 40 percent in the past year and that it may start offering oil via its stock exchange as soon as next week - which would allow private companies to export, thus bypassing the U.S. sanctions.

Even though analytical wisdom insists that the Iranian losses will be calamitous because other nations won't be able to offset them, indications still persisted that crude producing giants are substantially boosting output.

Case in point: Russia, whose deputy energy minister, Pavel Sorokin, said on Monday that production of hard-to-recover oil is expected to rise by 10 percent to 860,000 bpd this year, and that "Many of our companies have advanced in this direction."

Reuters noted that Russia's oilfield licenses regulator Rosnedra has put the country's hard-to-recover oil reserves at around 88 billion barrels, "two-thirds of all Russian oil reserves, and enough to supply the world with oil for 20 years."

Despite the hand-wringing from analysts, Russia, along with the Saudis, have been reluctant to boost output of late because they insist economic forecasts show a slowing of demand next year, and any concerted effort to raise production could result into the market suffering from oversupply.