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Iranian Sanctions and OPEC Guidance Grow 2024 Oil Risks


By Mitch Jennings  |  December 1, 2023

In recent weeks, U.S. Senior Advisor for Energy and Investment Amos Hochstein has said the U.S. will begin stricter enforcement of sanctions on Iran to bring down the country’s oil production. While Iran now produces ~4% of global supply,  it accounts for 13% of OPEC production. From 2000 to 2018, the country’s production averaged 3.6 MMb/d, but in November 2018, U.S. sanctions came back into force following a 180-day winddown period as the U.S. exited the Joint Comprehensive Plan of Action (JCPOA) under the Trump Administration. Following the JCPOA exit, Iran’s crude production fell almost immediately and bottomed out in Summer 2020 at 1.9 MMb/d. However, Iranian production has since resurged to 3.1 MMb/d in October 2023. In this Energy Market Insight, BTU Analytics takes a closer look at three possible scenarios for future Iranian output in the face of renewed U.S. sanctions and where Iran stands with regard to OPEC.

Sanctions enforcement is a challenge. Tactics such as ship-to-ship transfers, turning off tanker transponders, and labeling Iranian crude as being from a different place of origin make this segment of the market rather opaque. Demand for Iranian crude has also increased, as seen by export numbers, which may be as high as 1.5 MMb/d. Using IEA data, BTU Analytics calculates exports are closer to 1.1 MMb/d.

Three scenarios

BTU Analytics sees three potential scenarios when assessing Iran’s future output in regard to U.S. sanctions policy.

  1. Enforcement Improves: The U.S. steps up its enforcement of existing sanctions and potentially adds more, which could bring between 1–1.5 MMb/d off the market based on historical trends. This would then require increasing crude production in other countries, OPEC or otherwise, to balance the market. Venezuela may start to ramp up production, as Chevron was approved by the U.S. government to return to the country, with a potential near-term addition of under 200 Mb/d, according to the EIA. U.S. production rose over 1.0 MMb/d over the last year, but BTU Analytics forecasts U.S. crude production growth to slow to ~0.5 MMb/d in 2024. Saudi Arabia, along with OPEC, could bring more barrels to the market by decreasing the voluntary cut amounts.
  2. Enforcement for Publicity: The U.S. conducts “PR” enforcement, meaning a few headlines on seized tankers but not enough to actually curb production in Iran. Seizures of tankers and pressure on importing countries, e.g., China, and shipping companies can disincentivize production growth in Iran, but are not likely enough to prevent production from increasing. As a note, when tankers are seized, the oil is delivered to another country. For example, the U.S. offloaded 447 Mbbls of Iranian crude in August 2023. This is noteworthy since the seized barrels are not actually taken off the market, just redirected for processing somewhere other than their intended destination, thus technically remaining in the global crude balance. Under this scenario, Iranian crude production remains flat at 3.1 MMb/d going forward.
  3. Enforcement Lacks: If enforcement were to wane further, Iran could grow production by another 0.5–1.0 MMb/d in 2024–2025, reaching 4 MMb/d, which is in line with comments made by Iranian Oil Minister Javad Owji. This scenario implies almost no meaningful measures are taken by the U.S. and little is done to disincentivize Iranian offtakers from taking the sanctioned oil. As China is reportedly a top importer of Iran’s oil, it may prove difficult for the U.S. to have an Impact on China’s demand for Iranian blends since non-OECD countries are taking more crude from countries on the West’s blacklist.


At present, BTU Analytics expects little change to current U.S. enforcement strategy but recognizes the upside risk to the production forecast under the current status quo and potential downside risk to the oil price. Iran increasing production by 0.5–1.0 MMb/d could create issues for OPEC and its partners as well since the cartel would have to further limit production from countries under the quota system. It’s worth noting that Iran’s draft budget for 2024–‘25 calls for a decline in export volumes and production, as well as lower prices for its crude, which could be an indicator of increased domestic consumption. This estimated decline in exports could also be used by the U.S. to show its “stricter” sanctions enforcement is working.

Where Iran fits in OPEC

OPEC and its partners officially capped production for the remainder of 2023 at 39.7 MMb/d, which is about 44% of global crude production. On November 30, 2023, the group decided at the November 2023 Ordinary Meeting to adjust the 1Q24 target production from the initial guidance provided in the June 2023 Ordinary Meeting. June 2023 guidance called for OPEC+ to increase crude production 0.8 MMb/d for the entirety of 2024, but yesterday’s guidance calls for a cut of 2.2 MMb/d. When adjusting the new guidance to current production levels, the prior projected growth in 2024, and Russian participation, the actual cut is 0.9 MMb/d (-0.46 MMb/d OPEC, -0.48 from non-OPEC). Brazil was also invited to join the non-OPEC partner group starting in 2024, but its production quotas were not yet set. Due to ongoing sanctions and economic hardship, OPEC exempts Iran from the current quota system. Should sanctions enforcement be lacking and Iran allowed to increase production, other OPEC+ members would need to cut production further to offset Iranian growth and maintain a balanced market.


For a deeper dive into BTU Analytics’ oil market research, see BTU Analytics’ Oil Market Outlook.


BTU Analytics is a FactSet Company. This article was originally published on the BTU Analytics website.

This blog post is for informational purposes only. The information contained in this blog post is not legal, tax, or investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

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The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.