Tighter US and EU sanctions on Iran over its disputed nuclear programme are hitting hard and its oil production could plummet by up to a third in coming months, the IEA said on Thursday.
Iran's March oil production was down by 50,000 barrels per day to 3.3 million bpd -- some 250,000 bpd below pre-sanction levels at end-2011, the International Energy Agency said in its latest monthly report.
Now, "the long list of countries planning to implement import cuts in coming months suggests Iranian output could plummet to 2.6-2.8 mbpd by mid-summer, unless alternative buyers can be found," it said.
The 27 EU member states agreed an embargo on Iranian oil in January, with contracts to be phased out by July, as tensions increased over charges -- insistently rejected -- that Tehran is pursuing nuclear weapons.
"Iran's traditional crude buyers are struggling to arrange payment mechanisms, secure ships to lift the oil and insurance companies to underwrite the trade," the IEA noted.
A move in March to bar Iranian banks from one of the most important international fund transfer systems, "effectively severs all trade between EU and Iranian entities."
The IEA said Iran's major customers are all cutting back and reported that "securing insurance for tankers willing to lift Iranian crude has become ever more challenging.
"In a move that took the market by surprise, the China P&I Club, which provides coverage to more than 1,000 vessels, announced it will cease underwriting tankers operating from Iran."
Protection and Indemnity (P&I) clubs are owned by their ship-owner customers and set-up to provide insurance coverage against costly personal injury or environmental clean-up claims, the IEA said.
Iran is due to meet officials from Britain, China, France, Germany, Russia and the United States this weekend for talks about its nuclear programme.
Tehran consistently rejects Western charges it is building a nuclear bomb and has threatened to shut the strategic Strait of Hormuz, a major passageway for a fifth of the world's oil supply, if it is hit with further sanctions.