Iran can lose 50 percent of its export market due to oil ban

Oil&Gas Materials 9 January 2012 15:28 (UTC +04:00)

Azerbaijan, Baku, Jan. 9 /Trend A.Badalova/

Iran could lose 50 percent of its export market due to EU embargo on Iranian oil, major U.S. investment bank JP Morgan's analysts believe.

"If we assume that the EU embargo on Iranian oil goes ahead, and that India, Korea and Japan reduce imports from Iran by a third, Iran could potentially lose 50 percent of its export market, or 1 million barrels per day (bpd) to 1.2 mbd," analysts' daily oil market report says.

Coincidentally, this is roughly the same volume that analysts estimated that the Gulf Trio of Saudi Arabia, Kuwait and the UAE would have to cut back to rebalance the market in the second quarter of 2012.

The EU officials reached a tentative agreement last week to begin barring Iranian oil purchases. Details of that agreement must be developed ahead of the Jan. 30 foreign ministers' meeting, which will formally consider the proposal. During the meeting in Brussels the details of how the ban would be imposed will be discussed.

According to the EU diplomats, the embargo on Iranian crude oil imports could take a few months to come into effect because of a push by some EU capitals for a delay that they say is necessary to shield their debt-stricken economies.

JP Morgan's analysts believe that if the bar for a political solution is raised too high, Iran may look at alternative ways of pushing back against sanctions, which in turn increases the risks of a more serious supply disruption.

Iran, the second-biggest OPEC player after kingpin Saudi Arabia, produces about 2.3 million barrels of oil per day - 450,000 barrels of which is exported to the European Union, according to the US Department of Energy. The main European importers are Italy, Spain and Greece.

According to the EIA, Iran exported 543,000 barrels per day to China, 450,000 barrels to the EU, 341,000 barrels to Japan, 328,000 barrels to India, 244,000 barrels to South Korea, 182,000 barrels to Turkey in the first half of 2011.