The Fukushima disaster which closed down Japan's nuclear power system and knocked the economy off track did not increase its demand for oil so much as expected, the IEA said on Thursday.

A devastating earthquake and tsunami in March last year destroyed the Fukushima plant and appeared at one point near to jeopardising Japan's future, with its nuclear electricity system taken off line.

It was feared the disaster could force Japan to import additional oil and gas to make up the electricity shortfall but in the event the amounts involved were much less than expected, the International Energy Agency said in its latest monthly report.

The increase in "Japanese oil demand for power generation in 2011 due to Fukushima was around 145,000 barrels per day, or around half earlier estimates" as Japan made do with alternatives and power demand was kept down, it said.

"The outlook for 2012 depends on the reactivation of idled nuclear capacity, with incremental power sector oil demand of 250,000-300,000 bpd day versus normal nuclear generation," it added.

The IEA put the fall in Japanese electricity generation last year at 4.7 percent due to Fukushima and said it expected that in 2012 "some nuclear plants will be allowed to re-enter service as soon as governmental approval from national and local authorities is obtained."

The IEA said that the Japanese government now had to juggle its priorities -- economic growth, electricity generation and popular demands for greater safety -- against the use of nuclear power.

A "no-nuclear scenario would imply further electricity rationing and end-user prices exceeding 2011's records, calling into question the assumed 1.7 percent (economic) growth," it said.

"Nevertheless, a no-nuclear scenario cannot be ruled out, as public opinion channelled through local governments currently remains sceptical concerning the nuclear industry despite the apparent economic imperatives supporting nuclear capacity re-starts."

Sanctions could cause Iranian oil output to 'plummet': IEA
Paris (AFP) April 12, 2012 - Tighter US and EU sanctions on Iran over its disputed nuclear programme are hitting hard and its oil production could plummet by up to a third in coming months, the IEA said on Thursday.

Iran's March oil production was down by 50,000 barrels per day to 3.3 million bpd -- some 250,000 bpd below pre-sanction levels at end-2011, the International Energy Agency said in its latest monthly report.

Now, "the long list of countries planning to implement import cuts in coming months suggests Iranian output could plummet to 2.6-2.8 mbpd by mid-summer, unless alternative buyers can be found," it said.

The 27 EU member states agreed an embargo on Iranian oil in January, with contracts to be phased out by July, as tensions increased over charges -- insistently rejected -- that Tehran is pursuing nuclear weapons.

"Iran's traditional crude buyers are struggling to arrange payment mechanisms, secure ships to lift the oil and insurance companies to underwrite the trade," the IEA noted.

A move in March to bar Iranian banks from one of the most important international fund transfer systems, "effectively severs all trade between EU and Iranian entities."

The IEA said Iran's major customers are all cutting back and reported that "securing insurance for tankers willing to lift Iranian crude has become ever more challenging.

"In a move that took the market by surprise, the China P&I Club, which provides coverage to more than 1,000 vessels, announced it will cease underwriting tankers operating from Iran."

Protection and Indemnity (P&I) clubs are owned by their ship-owner customers and set-up to provide insurance coverage against costly personal injury or environmental clean-up claims, the IEA said.

Iran is due to meet officials from Britain, China, France, Germany, Russia and the United States this weekend for talks about its nuclear programme.

Tehran consistently rejects Western charges it is building a nuclear bomb and has threatened to shut the strategic Strait of Hormuz, a major passageway for a fifth of the world's oil supply, if it is hit with further sanctions.