April 5, 2012 / 3:22 PM / 5 years ago

UPDATE 1-Iran crude output may fall 1 mln bpd by July-JPM

* Production could fall by 1 mln bpd from Jan. levels

* Countries, including Japan an S.Africa, cutting imports

* US and EU sanctions take effect by July 1

By David Sheppard

April 5 (Reuters) - Iran's crude oil production could fall 1 million barrels per day by the end of June to below 2.5 million bpd, JPMorgan said in note to clients on Thursday, saying refiners have cut demand for oil from the Islamic Republic faster than previously expected.

In one of the largest forecasts yet on the effects of U.S. and European Union sanctions, JPMorgan's energy research team said evidence of deep cuts in Iranian crude imports by European, South African and Japanese refineries so far this year, and expected further cuts from others, had not yet been offset by Chinese buying.

"In total, the reported shifts ... may account for a further reduction of nearly 300,000 bpd in Iranian crude sales during April, which would imply lost sales are now approaching 700,000 bpd below January levels," wrote JPMorgan's energy research team, led by former International Energy Agency (IEA) analyst Lawrence Eagles.

"This is substantially faster than we expected and with likely further adjustments to come ... it would imply output could continue to push down below 2.5 million bpd by the time the embargoes are officially implemented, a net loss of 1 million bpd from January's level," the note stated.

U.S. and EU sanctions on countries importing Iran's crude oil exports are to go into effect by July 1.

The United States has been leaning on countries to reduce their imports of Iranian crude as part of broad-based sanctions aimed at pressuring Tehran to curb its nuclear program, which the West suspects is a cover to develop atomic weapons but which Iran says is purely civilian.

Countries risk being cut off from the U.S. financial system unless they can show they have taken steps to substantially reduce their reliance on Iranian oil, though some traders and analysts have questioned Washington's willingness to target China and India, Iran's two largest oil customers.

So far the United States has given waivers to Japan and 10 EU countries who have cut back on purchases.

Japanese refiners will cut Iranian crude imports further again in April as they shy away from renewing annual contracts.

Reuters reported in late March than Iran's oil exports had fallen by 300,000 bpd, or 14 percent, in the previous month.

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