A Review of the Nigerian Energy Industry

Iran losing $133m daily over oil embargo

02 July 2012, Sweetcrude, LONDON – OIL shipment from Iran have plunged by 1.2 million barrels a day, or 52 percent, since the US-led sanctions against the country, banning the purchase, transport, financing and insuring of Iranian crude began July 1.

This is costing the Iran, OPEC’s third-largest producer, $133 million a day in lost sales without raising global crude prices, according to data compiled by Bloomberg.

This translates to a yearly $48 billion loss in revenue, equivalent to 10 percent of the country’s economy.

While Iran’s threats to disrupt the flow of oil through the Persian Gulf sent crude to a three-year high in March, increased production from Saudi Arabia, a U.S. output boom and the slowing global economy have left prices 1.3 percent lower in 2012. That’s helping Obama avoid steeper domestic fuel costs before the November presidential election. Iran has to contend with a weakening currency and rising unemployment.

“It’s been an unqualified success,” Mike Wittner, head of oil-market research for the Americas at Societe Generale SA, said in a telephone interview from New York on July 25. “There were a lot of concerns sanctions could backfire by causing an oil-price spike, but in the end the U.S. and Europeans got their cake and they ate it too, because volumes are down and prices are down.”

In the United States, voter concern about fuel costs has plunged since Republican Mitt Romney, Obama’s presumptive challenger, called for firing top officials he blamed for rising gasoline prices in a March 18 interview on “Fox News Sunday.”

In a monthly Gallup poll on the most important issues facing the U.S., 1 percent of respondents cited fuel or oil prices in questioning July 9-12, compared with 8 percent in an April 9-12 survey.

Regular unleaded gasoline at the pump, averaged across America, fell 11 percent to $3.488 a gallon on July 27 from the 2012 high of $3.936 reached on April 4, according to data from Heathrow, Florida-based AAA, the largest U.S. motoring group.

Brent oil has dropped 4.2 percent to $105.97 a barrel since Jan. 23, when European Union ministers approved a ban on the purchase and insurance of Iranian oil.

The U.S. is paying 4.6 percent less than a year ago for imported crude as domestic fields produce the most in 13 years, driving stockpiles to all- time highs, Energy Department data show.

Crude futures in London rose as high as $128.40 on March 1, an advance of 20 percent for the year, after Iranian officials threatened to order the closing of the Strait of Hormuz.

The Gulf waterway, 21 miles wide (34 kilometers) at its narrowest, is a conduit for 20 percent of the world’s traded oil, according to the Washington-based Energy Information Administration.

Prices retreated as Saudi Arabia boosted output. The Organization of Petroleum Exporting Countries’ biggest producer is pumping more than 10 million barrels a day, the most in three decades and 22 percent more than at the end of 2010, according to the International Energy Agency.

The Paris-based adviser to the world’s biggest industrialised economies cut its forecast for global oil use four times this year, to 89.9 million barrels a day.

Iran is exporting 1.1 million barrels a day of oil, according to the median estimate of 10 analysts compiled by Bloomberg, down from an average of 2.3 million in 2011. The lost sales are valued at $133 million a day, based on the 2012 average price of $110.60 a barrel for Iran Heavy crude in Asia, according to Bloomberg data.

Daily output fell 9.5 percent in July to 2.86 million barrels, the lowest level since February 1990, a Bloomberg survey showed last month. Iran dropped to third among OPEC’s biggest producers, after holding the No. 2 spot since May 2000.

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