The Organization of the Petroleum Exporting Countries' (Opec) crude output dipped by 30,000 bpd to 31.72 million bpd in June from 31.75 million bpd in May, reversing most of the 40,000 bpd increment of previous month, according to a new survey.
The pressure on Iranian volumes intensified ahead of the July 1 implementation of European Union (EU) sanctions that not only ban the import of Iranian oil but also prohibit the provision of insurance for shipments of Iranian oil, even to non-EU destinations, said the survey by Platts, a leading global provider of information on energy, petrochemicals and metals industry.
Because of pooling arrangements for reinsurance between protection and indemnity clubs around the world, the sanctions are having a big impact on non-EU shipping, said the survey which involved key Opec and oil industry officials and analysts.
Also having an impact are US financial sanctions which came into effect on June 28. These would bar from the US financial system the banks of countries continuing to do oil-related business with Iran's central bank.
However, Washington has given 180-day waivers to a number of countries, including Iran's top Asian oil customers, which it deems to have made significant reductions in their imports of Iranian oil.
The survey estimated that Iranian output dropped by 150,000 bpd to 3.1 million bpd in June from 3.25 million bpd in May.
Commenting on the report, John Kingston, Platts director of news, said, 'The number that no survey can fully know is how much of Iran's output is going into storage because sanctions, notably the EU sanctions on shipping, have really hit Iran's exports.'
'The drop in Iran's sales is far greater than the drop in its output. So for now at least, the market is well-supplied, with all other Opec countries aside from Iran producing a net increase from last month, and with the Iranians socking away a lot of oil that will ultimately find its way on the market. From that perspective, it's more bearish news,' he noted
Smaller output dips totaling 30,000 bpd came from Angola and Iraq, while Saudi Arabia boosted output by 100,000 bpd in June to 10.1 million bpd, the survey found. Smaller increments totaling 50,000 bpd came from Libya and the UAE.
The June total leaves Opec's 12 members overproducing their 30 million bpd output ceiling by 1.72 million bpd.
The oil-producing organization's ministers agreed at a June 14 meeting in Vienna to maintain the ceiling, in effect since the beginning of the year.
Opec secretary general Abdalla el-Badri told reporters that the effect of the decision on production was unlikely to be felt until July. There are no official individual country quotas.
Oil prices have been volatile in recent months, with North Sea Brent plunging from as high as $128.40 per barrel (/b) on March 1 to as low as $88.49 per barrel on June 22.
This caused some consternation within Opec circles and a call from Iranian oil minister Rostam Ghasemi on June 30 for an emergency meeting of the group.
Brent has since climbed back to around the $100 barrel level, and Ghasemi said on July 7 that an Opec emergency meeting appeared unlikely for the time being now that prices had begun to increase again.