Sanctions on Iran are already hitting global oil flows even though a European ban on imports from the Islamic Republic does not come into effect until July, the International Energy Agency (IEA) says.
The IEA said the sanctions, designed to curb Iran's nuclear programme that Washington and its allies say aims to produce an atomic bomb, could affect far more Iranian oil than the 600,000 barrels per day (bpd) sold last year to the European Union.
The agency, adviser to the world's most industrialised nations on energy policy, cited industry estimates that up to 1 million bpd of Iran's 2.6 million bpd of oil exports may be replaced by alternative supplies once sanctions go into effect.
Iran could be forced to place unsold barrels into floating storage or even shut in production in the second half of this year, the IEA said on Friday in its monthly Oil Market Report.
"International sanctions targeting Iran's existing oil exports do not come into effect until July 1, but they are already having an impact on crude trade flows in Europe, Asia and the Middle East," it said.
The IEA said that although the EU imported only around 600,000 bpd of Iran's oil last year "broader U.S. and EU economic sanctions on Iran's Central Bank could be more pervasive if they successfully block the predominant channel for oil payments to Iran."
"Although there are five months before restrictions on existing contracts take effect, European customers have already curtailed imports of Iranian crude and Asian buyers are lining up alternative sources of supply," the IEA said, adding that European customers were likely to look to Russia, Iraq and Saudi Arabia for replacement barrels.
China, the single largest buyer of Iranian crude, taking about 550,000 bpd or about 20 percent of Iran's exports, was probably taking about half its 2011 volumes during the first quarter of 2012, although this was probably largely due to a dispute over prices in term contracts.
"Although China has strongly opposed sanctions, the state oil companies' bargaining position with the National Iranian Oil Co (NIOC) has clearly been strengthened by the international measures," it said.
"China has stepped up purchases of Saudi crude, reportedly buying an additional 200,000 bpd in recent months, though some of these extra volumes may be destined for newly completed (Chinese) strategic storage."
China was also buying more Russian ESPO crude and Angolan grades. India has also increased purchases from Saudi Arabia and reached an agreement with Iran to pay for 45 percent of its crude purchases in rupees.
India last year bought 350,000 bpd from Iran. Other Asian buyers, including Japan and South Korea, were importing record levels of crude from West Africa, especially Angolan and Nigerian grades, the report said.
© 2015 Thomson/Reuters. All rights reserved.