Iran has been forced to shut off wells in its expansive oil fields as Western sanctions reduce Tehran's vital crude oil exports by as much as 30%.
Tehran's current production levels to lows not seen in more than two decades, which has cost Iran billions in lost revenues.
Iran struggled to sell its oil in the run-up to the European Union ban on July 1, and now rates have fallen to half the rate of last year while storage is running out.
Tehran has announced it is carrying out "maintenance" at its aging reservoirs, which leaves Iran trailing former rival Iraq among the world's leading oil producers.
However, Iranian officials refuse to admit sanctions are biting deep. Sanctions began to negatively impact Iranian oil sales in March, but Tehran only conceded in June that its exports had taken a hit.
In hopes of fostering an appearance of strength, the Islamic Republic has refused to release data on its oil industry – making it difficult for analysts to form a clear view of just how deep Western sanctions have hit Iran.
But just last month, Iran acknowledged that exports had fallen sharply — down 20-30% from normal volumes of 2.2 million barrels daily.
In April, it was reported Iran had been forced to deploy more than half its fleet to store oil at anchorage in the Gulf, amounting to some 33 million barrels. Tehran is expected to store at least a further 8.3 million barrels this month.
Market observers and shipping industry experts say Iran is running out of places to store its crude as its wells runneth over.
Output from Iran’s aging fields has slumped from 3.9 million bpd in 2005, according to OPEC.
Iran is meanwhile dipping deep into savings to fund investment in its energy industry. On July 3 — two days after the EU embargo on Iranian oil took effect — the Iranian Oil Company tapped the National Development Fund for USD 14-billion.
The National Development Fund is a sovereign wealth fund. It is now valued at around USD 35-billion.