The Organization of the Petroleum Exporting Countries' (OPEC) crude output dipped by 30,000 barrels per day (b/d) to 31.72 million b/d in June from 31.75 million b/d in May, reversing most of the 40,000-b/d increment of the previous month, a Platts survey of OPEC and oil industry officials and analysts showed July 9. 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. 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.
Also having an impact are U.S. financial sanctions which came into effect on June 28. These would bar from the U.S. 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 b/d to 3.1 million b/d in June from 3.25 million b/d in May.
"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," said John Kingston, Platts director of news. "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."
Smaller output dips totaling 30,000 b/d came from Angola and Iraq, while Saudi Arabia boosted output by 100,000 b/d in June to 10.1 million b/d, the survey found. Smaller increments totaling 50,000 b/d came from Libya and the UAE.
The June total leaves OPEC's 12 members overproducing their 30 million b/d output ceiling by 1.72 million b/d.
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. 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/b 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/b 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.
Source: Platts