Iran’s oil exports, which have been rising following secret diplomacy with the US, are likely to have peaked for this year as demand in Asia wanes with the end of summer, according to people with knowledge of the country’s sales. The people familiar with Iran’s sales said flows are currently running at about 2 million barrels a day, close to the country’s capacity. While Tehran can boost exports again when demand returns, they’re unlikely to be higher than the current levels.
The volume compares with the 1.85 million a day that TankerTrackers.com Inc. said was shipped in August. The higher exports appear to be the result of Iran’s success in evading U.S. sanctions and Washington’s discretion in enforcing them as the two countries seek better relations.
Iran and the US have been engaged in indirect talks since April to revive the 2015 nuclear deal that former President Donald Trump abandoned in 2018 and reimposed sanctions on Iran’s oil industry. The talks have stalled since June, when Iran elected a new hardline president, Ebrahim Raisi, who took office in August.
Iran’s oil exports have been gradually recovering from a historic low of less than 500,000 barrels a day in April 2020, when the coronavirus pandemic slashed global demand and U.S. sanctions tightened. Iran has been able to find buyers in China, India, Turkey and other countries by offering discounts, using intermediaries and switching off transponders on tankers to avoid detection.
However, Iran’s oil exports are still far below the pre-sanctions level of about 2.5 million barrels a day in 2018. Iran has also been struggling to maintain its aging oil fields and infrastructure, which have suffered from years of underinvestment and lack of spare parts. Iran’s oil production capacity is estimated at about 2.3 million barrels a day by the International Energy Agency (IEA).
Iran’s oil exports are expected to decline in September and October as demand in Asia, its main market, weakens with the end of summer and the onset of refinery maintenance season. China, Iran’s largest customer, is also facing an economic slowdown and a power crunch that have curbed its appetite for crude oil.
Iran’s oil exports could rebound in November and December if demand recovers and if Iran and the US reach a breakthrough in the nuclear talks that would ease sanctions. However, analysts say that a full restoration of Iran’s oil exports is unlikely in the near term, as both sides face domestic political challenges and regional tensions.