Iran’s oil production is under renewed scrutiny following recent developments, particularly the United States’ military intervention in Venezuela. Despite ongoing U.S. sanctions, Iran has managed to ramp up its oil output to record levels, with estimates ranging from 3.2 million to 4 million barrels per day (bpd) in 2024. This increase comes as Iran strengthens its ties with China and other nations, allowing it to continue exporting crude oil.
The U.S. imposed sanctions on Iran’s energy sector in 2018, during President Donald Trump’s first term, and these have intensified since he began his second term in January 2023. While Iran possesses the world’s fourth-largest proven oil reserves—approximately 9 percent of the global total—it has struggled to regain its former influence in the energy market due to these sanctions and years of conflict.
Despite these challenges, Iranian crude has become increasingly appealing to buyers, particularly in China, which has emerged as the primary importer of Iranian oil. In the first half of 2025, Iranian crude accounted for around 13.6 percent of China’s oil purchases. The 90 percent of oil Iran exports goes directly to China, with buyers benefiting from significant discounts of $7 to $8 per barrel compared to global benchmarks.
Impact of U.S. Military Action in Venezuela
The U.S. military intervention in Venezuela on 3 January 2024, which included the capture of President Nicolás Maduro, has raised concerns about potential repercussions for Iran. Experts suggest that increased geopolitical uncertainty may lead trade partners to be more cautious in purchasing U.S.-sanctioned crude oil. This shift could further complicate Iran’s efforts to stabilize its economy, which continues to suffer despite rising oil exports.
While Iranian oil exports have shown resilience, the country faces significant economic hurdles. A former senior Iranian oil official noted, “Even if export volumes increase, the key problem is the repatriation of revenues, which faces numerous obstacles.” The Iranian economy is grappling with a collapsed currency and a headline inflation rate of 42.2% as of December 2023. Recent increases in gasoline prices due to unsustainable subsidies have sparked widespread protests across the nation.
China’s independent refiners, often referred to as “teapots,” have become major buyers of Iranian oil. These companies, particularly those located in Shandong province, contribute to about a quarter of China’s refinery capacity. However, state-owned oil companies in China remain wary of engaging in trade with Iran due to the U.S. sanctions. Following the introduction of new import quotas in November, Chinese teapots have increased their purchases of Iranian oil held in bonded storage and on idle tankers.
Future Prospects and Geopolitical Risks
The U.S. intervention in Venezuela has heightened concerns about the possibility of similar actions in Iran. President Trump has suggested that military options could extend to Colombia and Mexico, further complicating the geopolitical landscape. Iranian officials have warned that U.S. military intervention could lead to targeting of American troops in response.
As both Iran and Venezuela navigate U.S. sanctions, the repercussions of the recent military actions may lead to a shift in oil trade dynamics by 2026. Chinese refiners may reconsider their reliance on Iranian crude in light of increasing geopolitical uncertainty, although the impact of such changes remains to be seen.
In summary, Iran’s oil sector faces a critical juncture as it attempts to recover from years of sanctions while navigating a complex geopolitical environment. The interplay between U.S. actions in Venezuela and Iran’s oil production capacity will undoubtedly shape the future of the global energy market in the coming years.
