Iran’s crude oil output has increased by 20% in just 2 yrs, accounting to 3.3% of the world’s supply

Under the Organization of the Petroleum Exporting Countries (OPEC) cartel, which is headed by oil giant Saudi Arabia, Iran is the third-largest producer.

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Over the last two years, Iran’s crude production has increased by more than 20% to 3.4 million barrels per day (bpd), or 3.3% of the world’s total oil supply. A higher geopolitical risk premium despite supply concerns, according to analysts, could result from the market pricing a higher possibility of reduced Iran supplies due to the ongoing proxy fight with Israel.

Under the Organization of the Petroleum Exporting Countries (OPEC) cartel, which is headed by oil giant Saudi Arabia, Iran is the third-largest producer. Western sanctions have already been aimed against Iran, but if the war continues to damage the supply, it might lead to a spike in the price of crude oil globally.

Timeline: Emergence of Iran’s crude oil industry

According to Kpler, Iran exported 2.51 million barrels of crude oil per day in May 2018. Data from OPEC indicates it was the highest since 2011, when Iran’s average exports were 2.54 million bpd.

Iran is free from the group’s output restrictions, which are intended to support the oil market, despite being a member of both OPEC and OPEC+ (which unites OPEC and allies, including Russia). This is because of the sanctions imposed on Iran.

Driven by robust Chinese demand in the previous year and extending into 2024, industry analysts Kpler said that Iran’s oil exports in March 2024 averaged 1.61 million barrels per day (bpd), the highest since May 2023 when they reached 1.68 million bpd, the highest since 2018, according to news agency Reuters.

Iran ceased to provide data on its oil shipments, but estimates based on tanker monitoring revealed that they dropped dramatically in the following two years, reaching less than 200,000 barrels per day in 2020—the lowest level since 1980, according to OPEC data.

Late in 2020, US presidential candidate Joe Biden emerged victorious. China’s imports of Iranian oil surged to about 800,000 barrels per day in January and nearly one million barrels per day in March of 2021, but they fell again in April of the same year.

In an effort to get both Iran and the US back into complete compliance with the 2015 nuclear deal, indirect negotiations were started in 2021.

Iranian exports increased in 2022 and exceeded one million bpd by the end of the year.

Crude oil prices ahead

Iran is unlikely to increase its production and realize its geologic potential despite possessing about 12% of the world’s proven oil reserves, according to analysts. This is especially true if Tehran’s geopolitical ties become more complicated by the Israel-Hamas conflict.

“We estimate that oil prices already reflect a $5-to-$10-a-barrel risk premium from downside risks to supply,” stated analysts at Goldman Group Sachs Inc . “The potential Israeli response to Iran’s attack is highly uncertain and will likely determine the extent of threat to regional oil supply,” they continued.

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