The impact of U.S. sanctions on Iranian production, despite the existing waivers, has been substantial, Trend reports with reference to the World Bank’s Commodity Markets Outlook.
Output is down almost 30 percent (1.1 mb/d) relative to its peak in the second quarter of 2018, and comparable to the impact of earlier sanctions in 2014, the report reads.
WB said that global oil production plunged in the first quarter of 2019, following a sharp expansion in the preceding quarter.
"The increase at the end of last year was primarily due to Saudi Arabia, who substantially increased production between June and October by 0.6 mb/d in anticipation of the U.S. sanctions on Iran. However, in November the U.S. decided to grant waivers to the sanctions to eight countries, including China and India (which together account for 18 percent of global oil consumption). This led to much higher-than-expected levels of production in November and December, contributing to a rise in inventories and declining prices," reads the report.
"In response to these developments, OPEC and its coalition of partners, including Russia, agreed to implement production cuts of 1.2 mb/d starting in 2019. Compliance with the agreement by OPEC members has been strong, and output has fallen by more than agreed levels. Production curtailments have been led by Saudi Arabia, which reduced output by 8 percent (0.81 mb/d) between October 2018 and March 2019, compared with its agreed cut of 3 percent (0.32 mb/d). NonOPEC countries have been slower to adhere to the reduction, with Russia projected to reach its target in April. OPEC and its partners are expected to decide whether to extend production limits at their meeting in June."
The US State Department has said that the country won’t issue additional reduction exceptions to existing importers of Iranian oil.
"United States will not issue any additional Significant Reduction Exceptions to existing importers of Iranian oil. The Trump Administration has taken Iran’s oil exports to historic lows, and we are dramatically accelerating our pressure campaign in a calibrated way that meets our national security objectives while maintaining well supplied global oil markets. We stand by our allies and partners as they transition away from Iranian crude to other alternatives. We have had extensive and productive discussions with Saudi Arabia, the United Arab Emirates, and other major producers to ease this transition and ensure sufficient supply. This, in addition to increasing U.S. production, underscores our confidence that energy markets will remain well supplied," reads the message.
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